Installed Building Products

Installed Building Products Inc is assigned a 5-star quantitative star rating, reflecting our opinion that this share class offers a compelling opportunity for investors. The stock currently trades at a 25% discount to our quantitative fair value estimate of $253.43 per share; however, some caution is warranted due to this estimate's medium uncertainty rating.

The firm's profitability bolsters our estimated valuation. Highly profitable companies are often more resilient in recessions and are likely to generate stronger future cash flows for shareholders. Reflecting the firm's profitability is its assets turnover ratio of 1.4, which ranks in the top 10% compared with global peers. This exemplifies its robust ability to scale the benefits it wrings out of a fixed set of assets and inventory. We believe this is a sign that shares could be undervalued.

On a different note, the firm's valuation metrics are potentially concerning. A company's valuation metrics provide insights into the market's expectations for its future growth and profitability. The firm's book value yield of 12.5%, for example, ranks in the bottom 20% compared with peers globally. The market value of this company's shares looks expensive relative to the book (accounting) value of equity, which, despite our favorable price/fair value ratio, is a negative attribute.

The company's narrow economic moat rating suggests it should be able to maintain robust profitability for a decade or longer before competition erodes its advantage. In addition, the company's moderate financial health score is decent and doesn't seriously concern us with regard to financial distress.