JELD-WEN Holding Inc. (JELD, Financial) makes doors and windows and sells them through a network of dealers in 85 countries across Australia, Asia, Europe and North America as well as via big box retail channels like Home Depot and Lowes. It's one of two global manufacturers in doors and one of the largest makers of windows. Both add up to brand power.
In the last 12 months, Jeld-Wen has generated over $4.2 billion in sales, and in the last quarter $1.14 billion, up 15% year over year. Since the company went public last year at $23, the stock had a brief run to $40, but has been dropped by more than 60%.
The first year as a publicly traded company is tough. Remember that Facebook dropped from $38 to $18 in its first year. Jeld-Wen should continue to perform well financially, which means this current price is a major bargain. Much of the post-IPO selling is typically related to venture and private equity investors recouping capital.
Jeld-Wen was bought by Onex Corp. (ONEX) in 2011 in what seemed, at the time, to be a rescue effort of the door and window manufacture. Onex continues to hold a 32% stake in the company via Onex Partners III Group. That said, Onex has invested in the company to help it rebuild its brand. In its latest quarter the company reported GAAP earnings per share of 27 cents, meaning it was still profitable despite very costly litigation with Steves & Sons.
Looking forward, Jeld-Wen is expected to earn north of $2 per share in 2019. That puts its current price at just 0.4x sales and under 8x earnings. More importantly, given its brand recognition, Jeld-Wen should be able to raise prices over time in the face of higher raw material and freight costs. Short-term pressure from tariffs on wood should subside, and any positive news from the U.S.-Canada relationship would be a positive addition to earnings per share. Thus, again, the $2 expectation is with all this negativity priced in.
Even if the demand for doors and windows tapers off slightly, there is still a ton of existing homes that new remodeling in order to sell in major cities. Plus, new home sales will continue to impact smaller, up and coming, cities in the United States.
As for valuation, the company is a leader in the market, which should price it at least on par with the industry. At 15x earnings, JELD would trade in the $30 range. At 1.0x sales, the stock would trade upwards of $40 a share. One thing is certain: The current price is undervalued.
Disclosure: I am not long or short Jeld-Wen.
