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Here’s Why You Should Add Boise Cascade (BCC) Right Now


Boise Cascade Company BCC is one of the largest producers of engineered wood products and plywood in North America and a leading U.S. wholesale distributor of building products. This Zacks Rank #1 (Strong Buy) company has solid prospects and should make a valuable addition to your portfolio. Let us delve deeper into the other factors which make this stock a lucrative pick.

Earnings & Revenue Growth

Boise Cascade makes a great pick in terms of growth investment. Arguably, nothing is more important than earnings growth as surging profit levels are often an indication of strong prospects.

While Boise Cascade has put up a historical EPS growth rate (average trailing 12-month EPS growth rate over the last 3-5 years of actual earnings) of 58.4%, compared with the industry average of 23.7%, investors should really focus on the projected growth. Here, the company is looking to grow at a rate of 61.4%, while the Zacks categorized Building Products – Wood industry’s average calls for EPS growth of just 26.7%.

Meanwhile, sales of the company grew 8% in 2016 and 11% in the first quarter of 2017. Notably, the company’s sales growth in 2017 is projected to be about 10.5%.

For all these reasons, the company currently has a Growth Score of ‘B’ on our style score system that helps us identify potential outperformers.

Valuation Looks Rational

Boise Cascade has a Value Style Score of ‘B’, putting it into the top 40% of all stocks we cover from this perspective.

The company currently has a trailing 12-months Price-to-Earnings (P/E) ratio of 24.92, while the industry’s average stands at 33.4. Moreover, its forward P/E ratio (price compared to this year’s earnings) is lower at 17.49. This indicates that a slightly more value-oriented path may be ahead for Boise Cascade.

Looking at the company’s sales, the company currently trades at a Price-to-sales (P/S) ratio of 0.29, significantly lower than the industry average of 3.18. Some prefer this metric more than other value-focused ones because sales are harder to manipulate with accounting tricks than earnings.

An often overlooked ratio that can still be a great indicator of value is the price/cash flow metric. This ratio doesn’t take amortization and depreciation into account, so can give a more accurate picture of the financial health of a business. Boise Cascade has a P/CF of 9.42, lower than the industry’s average of 13.72.

All these ratios show that the company is undervalued in comparison to its industry peers and thus it a good time to place a bet on the stock.

Stock Price & Other Returns

Shares of Boise Cascade have returned over 34% so far this year, comparing favorably with the Building Products – Wood industry’s gain of 10.7%. That said, we noticed that the company has outperformed the industry in each of 4-week, 12-week and 52-week time frames.

Furthermore, the Return on Equity delivered in the trailing 12 months is around 8%, while the industry returned 6.7%.

Earnings History and Future Estimates

Boise Cascade has remarkably beaten earnings estimates in three of the trailing four quarters, recording an average beat of 114.7%.

Furthermore, over the past 60 days, the company has been seeing an upward trend in earnings estimate revision for 2017 (up 17.2%) and 2018 (up 11.1%). These positive earnings estimate revisions indicate analysts’ confidence in the stock and also add to the optimism.

Industry Outlook Positive

The Zacks Building Products – Wood industry has outperformed the broader market in the last one year. Currently, the industry ranks among the top 6% (16 out of 265 industries). Along with the strong past performance of the industry, a good industry rank signals that the stock is likely to benefit from favorable broader factors in the immediate future.

Bottom Line

The company expects to experience modest demand growth for its products, with seasonally stronger sales volumes in the second and third quarters. However, the company cautioned that future commodity product pricing could be volatile in response to industry operating rates, net import and export activity, the North American softwood lumber trade dispute, inventory level and seasonal demand patterns.

Nevertheless, Boise Cascade is expected to perform well in the quarters ahead, given its strong fundamentals. Moreover, the company’s VGM Score of 'B' coupled with a Zacks Rank #1 makes for a solid investment choice.

Other Stocks to Consider

Other top-ranked stocks in the broader construction sector include Lyon William Homes WLH, M/I Homes, Inc. MHO and KB Home KBH.

M/I Homes sport a Zacks Rank #1 and is likely to witness 36.2% rise in earnings. You can see the complete list of today’s Zacks #1 Rank stocks here.

Lyon William, a Zacks Rank #2 (Buy) stock, is expected to exhibit 38.4% growth in 2017 earnings.

KB Home, a Zacks Rank #2 stock, is likely to witness 43.3% growth in fiscal 2017 earnings.

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