Trex Company, Inc. (TREX · NYSE)
Turning Bin Bags Into Back Gardens
Trex turns old plastic film and waste wood into decking boards and railings that never need staining, and sells them through builders' merchants and the big American home-improvement chains.
Bull case for Trex Company, Inc.
Waste inputs give a lasting cost edge
Cheap recycled film and scrap wood keep raw material costs below rivals using new plastic.
Only brand stocked in both big chains
Shelf space at both major US home-improvement retailers is something no competitor holds.
Heavy building phase is finished
With three plants built, more of the cash generated is now free for shareholders.
Bear case for Trex Company, Inc.
Home improvement spending drives demand
Decks are postponable purchases, so weak repair-and-remodel budgets directly reduce Trex volumes.
Three customers buy most output
A small group of buyers takes the large majority of sales, concentrating negotiating power.
New plant must fill up to pay off
Margins depend on running factories hard, so idle capacity works against profitability.