Why Trex's Shares Dropped Today

Why Trex's Shares Dropped Today

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of composite decking company Trex dropped 13% today after reporting earnings.

So what: Second-quarter revenue rose 5% to $98.6 million but analysts were expecting $103.3 million. The bottom line was even worse when the company reported earnings of $0.86 per share, below the $1.00 consensus estimate.

Now what: Investors were also disappointed by revenue guidance of $72 million for the third quarter, which also fell below estimates of $78.3 million. Shares were trading at 18 times forward earnings and that's before analysts adjust estimates lower based on guidance. That's not a good value for a company barely growing revenue, and it will keep me away from the stock today.

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The article Why Trex's Shares Dropped Today originally appeared on Fool.com.

Fool contributor Travis Hoium has no position in any stocks mentioned. The Motley Fool recommends Trex. The Motley Fool owns shares of Trex. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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