Creating Growth Out Of Garbage


Since 2008, few companies have had their stocks perform as well as Trex Co. Inc. (NYSE:TREX), the leader in composite decking material. In 2008, new management took over in the form of CEO Ron Kaplan, and since then, Trex has seen its stock rise over 1,800%. In August 2015, new CEO and former CFO Jim Cline succeeded Kaplan. Despite the amazing run the stock has been on, this growth story is only beginning.

Company Background

In 2008, Trex was hit with increased market competition so new management had to be proactive to maintain market share of the composite decking industry. Trex focused on research and development to come up with a better product that could outlast competition. The result was Transcend, a composite deck made from recycled plastic bags from retailers and sawdust and woodchips from furniture makers. Transcend became the best composite deck on the market and it comes with a 25-year warranty.

Future Growth

Trex currently dominates an estimated 44% of the composite wood alternative decking industry compared to 30% five years ago. The interesting part of the story is that just 10% of the total decking industry is composite wood, with the other 90% still being traditional wood. Not only does composite decking far outlast the traditional wooden decking, but composite decking is also significantly cheaper. Trex believes it can continue to steal market share from traditional wooden decking companies and see significant growth. It is projected that every 1% gain would translate into $50 million in sales for Trex.

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