Masonite
International (DOOR, $114.45): “One Door Closes Another Opens”
By: Drew Kolz, AIM Student at Marquette University
Summary
- Masonite International (NYSE:DOOR) engages in the design and manufacturing of interior and exterior doors for both the residential and nonresidential construction markets. DOOR does most of their business in the United States and Europe.
- With over $591 million in available liquidity, Masonite has flexibility to expand their Doors That Do More and MVantage strategies while also potentially make new acquisitions where they see fit.
- Masonite will continue to be a direct beneficiary from the booming real estate market. The Dow Jones U.S. Real Estate Index is up 28.52% YTD and has shown no signs of decreasing yet.
- With sales predicted to be reach $4 billion by 2025, Masonite has reinvested in themselves and begun the construction of two new large facilities in South Carolina and Europe.
Key Points: When this stock was originally pitched, Masonite’s MVantage strategy was listed as the second main driver. After reviewing how the company has fared since then, it is safe to say that this vision has done exactly what they hoped. Behind the goal of decreasing costs and increasing margins, Masonite was able to announce that they just finished Q2 with their highest net sales and adjusted EBITDA since they became a publicly traded company in 2013. With these increased margins, Masonite will be able to continue to invest in making their doors as versatile as possible.
Covid-19 has completely reshaped the residential and nonresidential construction markets. With work from home becoming a new normal, people have become much more inclined to find new homes. In result, the suburban housing market has completely blown up. According to a survey done by The Neighbor, as many as 14-23 million people are expected to move in 2021. Furthermore, home ownership is up 11% in 2021. As people to continue to move out to the suburbs in search of lower cost of living and less populated areas, Masonite should continue to see demand for their doors.
Masonite’s strong balance sheet is something that is going to greatly benefit them going forward. With over $591 million in available liquidity and sales expected to nearly double from $2.1 billion to $4 billion by 2025, Masonite realized that now is the time to reinvest in themselves. With two new facilities expected to be completed by the middle of 2022, Masonite expects increased capacity and greater operational efficiency. Not to mention, the company remains extremely flexible if any potential acquisitions are to arise in the near future.
What has the stock done lately?
Over the
course of the past 3 months, the stock has generated a -2.30% return. Despite
the stock being slightly down over the course of the past 3 months, the price
trend appears to be positive moving forward. With demand remaining strong in
the residential end markets, and commercial end markets showing signs of
recovery from the pandemic, there is no reason the stock price shouldn’t
recover as well.
Past Year Performance: Masonite has returned 22.83% over the past year. While this number is lower than the benchmark’s return of 47.34%, Masonite will remain a big player in their industry. Over the last 52 weeks the stock has ranged from $78.00 to $132.22. On track for another record year in sales, there is plenty of reasons for optimism.
My Takeaway
DOOR was originally added to the AIM portfolio with a price target of $115.18, representing a 29.83% upside. While the stock has been trading around this price target recently, I do not believe that it is time to sell. Masonite’s continued reinvestment in themselves has positioned the company for even more growth. Furthermore, with more and more people moving out of cities and looking for cheaper housing in the suburbs, demand for Masonite doors will remain strong. Until the housing market begins to slow down, I recommend the AIM portfolio hold DOOR.
