TopBuild (BLD)
TopBuild doesn’t excite us. Its decelerating growth shows demand is falling and its weak gross margin indicates it has bad unit economics.― StockStory Analyst Team
1. News
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2. Summary
Why TopBuild Is Not Exciting
Established in 2015 following a spinoff from Masco Corporation, TopBuild (NYSE:BLD) is a distributor and installer of insulation and other building products.
- Forecasted revenue decline of 1.2% for the upcoming 12 months implies demand will fall off a cliff
- Organic revenue growth fell short of our benchmarks over the past two years and implies it may need to improve its products, pricing, or go-to-market strategy
- A bright spot is that its earnings growth has outpaced its peers over the last five years as its EPS has compounded at 28.7% annually
TopBuild doesn’t live up to our standards. You should search for better opportunities.
Why There Are Better Opportunities Than TopBuild
High Quality
Investable
Underperform
Why There Are Better Opportunities Than TopBuild
TopBuild is trading at $383.97 per share, or 18.7x forward P/E. TopBuild’s multiple may seem like a great deal among industrials peers, but we think there are valid reasons why it’s this cheap.
Our advice is to pay up for elite businesses whose advantages are tailwinds to earnings growth. Don’t get sucked into lower-quality businesses just because they seem like bargains. These mediocre businesses often never achieve a higher multiple as hoped, a phenomenon known as a “value trap”.
3. TopBuild (BLD) Research Report: Q1 CY2025 Update
Building services and installation company TopBuild (NYSE:BLD) met Wall Street’s revenue expectations in Q1 CY2025, but sales fell by 3.6% year on year to $1.23 billion. The company’s outlook for the full year was close to analysts’ estimates with revenue guided to $5.2 billion at the midpoint. Its non-GAAP profit of $4.63 per share was 5.3% above analysts’ consensus estimates.
TopBuild (BLD) Q1 CY2025 Highlights:
- Revenue: $1.23 billion vs analyst estimates of $1.23 billion (3.6% year-on-year decline, in line)
- Adjusted EPS: $4.63 vs analyst estimates of $4.40 (5.3% beat)
- Adjusted EBITDA: $91.37 million vs analyst estimates of $227.7 million (7.4% margin, 59.9% miss)
- The company reconfirmed its revenue guidance for the full year of $5.2 billion at the midpoint
- EBITDA guidance for the full year is $1 billion at the midpoint, below analyst estimates of $1.01 billion
- Operating Margin: 14.4%, down from 16.8% in the same quarter last year
- Free Cash Flow Margin: 11.3%, down from 12.4% in the same quarter last year
- Market Capitalization: $8.54 billion
Company Overview
Established in 2015 following a spinoff from Masco Corporation, TopBuild (NYSE:BLD) is a distributor and installer of insulation and other building products.
The company operates through two segments: Installation and Specialty Distribution. The Installation segment, operating under the TruTeam brand, serves a range of customers including builders, homeowners, and commercial contractors. TruTeam distinguishes itself through its nationwide network of contractor services and primarily installs fiberglass, spray foam, and cellulose insulation products.
The Specialty Distribution segment, operating under the Service Partners brand, distributes insulation, accessories, and other building materials through 160+ centers. It serves contractors, dealers, and builders, and demand is mainly driven by residential and commercial construction, remodeling, and the need for energy-efficient buildings.
The marriage of TruTeam and Service Partners makes TopBuild a one-stop-shop solution that effectively serves the broad needs of the construction industry. It also gives the company scale and a broader customer reach through local presences, providing it with competitive advantages in a fragmented market.
When expanding its business, TopBuild has been quite acquisitive. One big deal it executed was the 2021 purchase of Distribution International for $1 billion. Distribution International was a key strategic move for the company as it extended its reach into the maintenance, repair, and overhaul (MRO) market, which sports recurring revenue characteristics. This large transaction was an anomaly, however, as TopBuild generally prefers to acquire many smaller companies in the sub $50 million enterprise value range as it can negotiate better terms and pricing, giving its deals a better chance of being accretive to its earnings.
4. Home Builders
Traditionally, homebuilders have built competitive advantages with economies of scale that lead to advantaged purchasing and brand recognition among consumers. Aesthetic trends have always been important in the space, but more recently, energy efficiency and conservation are driving innovation. However, these companies are still at the whim of the macro, specifically interest rates that heavily impact new and existing home sales. In fact, homebuilders are one of the most cyclical subsectors within industrials.
TopBuild’s primary competitors include Installed Building Products (NYSE:IBP), Masco (NYSE:MAS), Owens Corning (NYSE:OC), and Builders FirstSource (NYSE:BLDR).
5. Sales Growth
A company’s long-term sales performance can indicate its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Over the last five years, TopBuild grew its sales at an exceptional 14.7% compounded annual growth rate. Its growth beat the average industrials company and shows its offerings resonate with customers, a helpful starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. TopBuild’s recent performance shows its demand has slowed significantly as its annualized revenue growth of 1.7% over the last two years was well below its five-year trend.
This quarter, TopBuild reported a rather uninspiring 3.6% year-on-year revenue decline to $1.23 billion of revenue, in line with Wall Street’s estimates.
Looking ahead, sell-side analysts expect revenue to decline by 2% over the next 12 months, a deceleration versus the last two years. This projection is underwhelming and indicates its products and services will see some demand headwinds. At least the company is tracking well in other measures of financial health.
6. Gross Margin & Pricing Power
Gross profit margin is a critical metric to track because it sheds light on its pricing power, complexity of products, and ability to procure raw materials, equipment, and labor.
TopBuild’s gross margin is slightly below the average industrials company, giving it less room to invest in areas such as research and development. As you can see below, it averaged a 29.6% gross margin over the last five years. That means TopBuild paid its suppliers a lot of money ($70.36 for every $100 in revenue) to run its business.
TopBuild’s gross profit margin came in at 28.5% this quarter, marking a 1.8 percentage point decrease from 30.3% in the same quarter last year. TopBuild’s full-year margin has also been trending down over the past 12 months, decreasing by 1 percentage points. If this move continues, it could suggest a more competitive environment with some pressure to lower prices and higher input costs (such as raw materials and manufacturing expenses).
7. Operating Margin
TopBuild has been a well-oiled machine over the last five years. It demonstrated elite profitability for an industrials business, boasting an average operating margin of 15.7%. This result was particularly impressive because of its low gross margin, which is mostly a factor of what it sells and takes huge shifts to move meaningfully. Companies have more control over their operating margins, and it’s a show of well-managed operations if they’re high when gross margins are low.
Analyzing the trend in its profitability, TopBuild’s operating margin rose by 2.5 percentage points over the last five years, as its sales growth gave it operating leverage.

In Q1, TopBuild generated an operating profit margin of 14.4%, down 2.4 percentage points year on year. Since TopBuild’s operating margin decreased more than its gross margin, we can assume it was less efficient because expenses such as marketing, R&D, and administrative overhead increased.
8. Earnings Per Share
We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.
TopBuild’s EPS grew at an astounding 29.1% compounded annual growth rate over the last five years, higher than its 14.7% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

We can take a deeper look into TopBuild’s earnings quality to better understand the drivers of its performance. As we mentioned earlier, TopBuild’s operating margin declined this quarter but expanded by 2.5 percentage points over the last five years. Its share count also shrank by 13.2%, and these factors together are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth.
Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.
For TopBuild, its two-year annual EPS growth of 7.7% was lower than its five-year trend. This wasn’t great, but at least the company was successful in other measures of financial health.
In Q1, TopBuild reported EPS at $4.63, down from $4.81 in the same quarter last year. Despite falling year on year, this print beat analysts’ estimates by 5.3%. Over the next 12 months, Wall Street expects TopBuild’s full-year EPS of $20.86 to shrink by 1.2%.
9. Cash Is King
Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.
TopBuild has shown robust cash profitability, enabling it to comfortably ride out cyclical downturns while investing in plenty of new offerings and returning capital to investors. The company’s free cash flow margin averaged 11.9% over the last five years, quite impressive for an industrials business.
Taking a step back, we can see that TopBuild’s margin was unchanged during that time, showing its long-term free cash flow profile is stable.

TopBuild’s free cash flow clocked in at $139.2 million in Q1, equivalent to a 11.3% margin. The company’s cash profitability regressed as it was 1.1 percentage points lower than in the same quarter last year, prompting us to pay closer attention. Short-term fluctuations typically aren’t a big deal because investment needs can be seasonal, but we’ll be watching to see if the trend extrapolates into future quarters.
10. Return on Invested Capital (ROIC)
EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).
TopBuild’s five-year average ROIC was 18.4%, placing it among the best industrials companies. This illustrates its management team’s ability to invest in highly profitable ventures and produce tangible results for shareholders.
We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, TopBuild’s ROIC averaged 4 percentage point increases each year. This is a great sign when paired with its already strong returns. It could suggest its competitive advantage or profitable growth opportunities are expanding.
11. Balance Sheet Assessment
TopBuild reported $308.8 million of cash and $1.57 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $912.1 million of EBITDA over the last 12 months, we view TopBuild’s 1.4× net-debt-to-EBITDA ratio as safe. We also see its $54.3 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.
12. Key Takeaways from TopBuild’s Q1 Results
It was encouraging to see TopBuild beat analysts’ EPS expectations this quarter. We were also happy its revenue was in line with Wall Street’s estimates. On the other hand, its EBITDA missed significantly and its full-year EBITDA guidance fell slightly short of Wall Street’s estimates. Overall, this was a mixed quarter. The stock remained flat at $293.89 immediately following the results.
13. Is Now The Time To Buy TopBuild?
Updated: July 28, 2025 at 12:06 AM EDT
Before deciding whether to buy TopBuild or pass, we urge investors to consider business quality, valuation, and the latest quarterly results.
TopBuild has a few positive attributes, but it doesn’t top our wishlist. To kick things off, its revenue growth was exceptional over the last five years. And while TopBuild’s projected EPS for the next year is lacking, its astounding EPS growth over the last five years shows its profits are trickling down to shareholders.
TopBuild’s P/E ratio based on the next 12 months is 18.7x. While this valuation is fair, the upside isn’t great compared to the potential downside. We're fairly confident there are better stocks to buy right now.
Wall Street analysts have a consensus one-year price target of $382.02 on the company (compared to the current share price of $383.97).