Installed Building Products (IBP)

Building products installation services company Installed Building Products (NYSE:IBP) reported Q3 CY2025 results exceeding the market’s revenue expectations, with sales up 2.3% year on year to $778.2 million. Its non-GAAP profit of $3.18 per share was 15.4% above analysts’ consensus estimates.

Company Overview

Founded in 1977, Installed Building Products (NYSE:IBP) is a company specializing in the installation of insulation, waterproofing, and other complementary building products for residential and commercial construction.

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.

Competitors in the building and construction sector include KB Home (NYSE:KBH), Lennar (NYSE:LEN), and PulteGroup (NYSE:PHM).

Examining a company’s long-term performance can provide clues about its quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Over the last five years, Installed Building Products grew its sales at an excellent 13% compounded annual growth rate. Its growth beat the average industrials company and shows its offerings resonate with customers.

Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Installed Building Products’s recent performance shows its demand has slowed significantly as its annualized revenue growth of 4.1% over the last two years was well below its five-year trend.

This quarter, Installed Building Products reported modest year-on-year revenue growth of 2.3% but beat Wall Street’s estimates by 4%.

Looking ahead, sell-side analysts expect revenue to decline by 3.2% over the next 12 months, a deceleration versus the last two years. This projection doesn't excite us and suggests its products and services will see some demand headwinds.

Installed Building Products’s unit economics are better than the typical industrials business, signaling its products are somewhat differentiated through quality or brand. As you can see below, it averaged a decent 32.4% gross margin over the last five years. That means for every $100 in revenue, roughly $32.44 was left to spend on selling, marketing, R&D, and general administrative overhead.

In Q3, Installed Building Products produced a 34% gross profit margin, in line with the same quarter last year. Zooming out, the company’s full-year margin has remained steady over the past 12 months, suggesting its input costs (such as raw materials and manufacturing expenses) have been stable and it isn’t under pressure to lower prices.

Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

Installed Building Products has been an efficient company over the last five years. It was one of the more profitable businesses in the industrials sector, boasting an average operating margin of 12.3%.

Looking at the trend in its profitability, Installed Building Products’s operating margin rose by 2.8 percentage points over the last five years, as its sales growth gave it operating leverage. Its expansion shows it’s one of the better Home Builders companies as most peers saw their margins plummet.

In Q3, Installed Building Products generated an operating margin profit margin of 13.7%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.

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.

Installed Building Products’s EPS grew at an astounding 22.4% compounded annual growth rate over the last five years, higher than its 13% 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 Installed Building Products’s earnings to better understand the drivers of its performance. As we mentioned earlier, Installed Building Products’s operating margin was flat this quarter but expanded by 2.8 percentage points over the last five years. On top of that, its share count shrank by 8.5%. These 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 Installed Building Products, its two-year annual EPS growth of 5.4% was lower than its five-year trend. We hope its growth can accelerate in the future.

In Q3, Installed Building Products reported adjusted EPS of $3.18, up from $2.85 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Installed Building Products’s full-year EPS of $11.09 to shrink by 8.2%.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

Installed Building Products has shown impressive cash profitability, enabling it to ride out cyclical downturns more easily while maintaining its investments in new and existing offerings. The company’s free cash flow margin averaged 8.8% over the last five years, better than the broader industrials sector.

Taking a step back, we can see that Installed Building Products’s margin expanded by 4 percentage points during that time. This shows the company is heading in the right direction, and we can see it became a less capital-intensive business because its free cash flow profitability rose more than its operating profitability.

Installed Building Products’s free cash flow clocked in at $104.8 million in Q3, equivalent to a 13.5% margin. This result was good as its margin was 3.3 percentage points higher than in the same quarter last year, building on its favorable historical trend.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Although Installed Building Products hasn’t been the highest-quality company lately, it found a few growth initiatives in the past that worked out wonderfully. Its five-year average ROIC was 21.6%, splendid for an industrials business.

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, Installed Building Products’s ROIC averaged 2.4 percentage point increases each year. This is a good sign, and if its returns keep rising, there’s a chance it could evolve into an investable business.

Installed Building Products reported $333.3 million of cash and $985.3 million 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 $508.3 million of EBITDA over the last 12 months, we view Installed Building Products’s 1.3× net-debt-to-EBITDA ratio as safe. We also see its $17.7 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.

We were impressed by how significantly Installed Building Products blew past analysts’ EBITDA expectations this quarter. We were also excited its revenue outperformed Wall Street’s estimates by a wide margin. Zooming out, we think this was a good print with some key areas of upside. The stock remained flat at $240.15 immediately following the results.

Updated: December 4, 2025 at 10:27 PM EST

The latest quarterly earnings matters, sure, but we actually think longer-term fundamentals and valuation matter more. Investors should consider all these pieces before deciding whether or not to invest in Installed Building Products.

Installed Building Products is a fine business. To kick things off, its revenue growth was impressive over the last five years. And while its 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. On top of that, its stellar ROIC suggests it has been a well-run company historically.

Installed Building Products’s P/E ratio based on the next 12 months is 25.1x. When scanning the industrials space, Installed Building Products trades at a fair valuation. If you’re a fan of the business and management team, now is a good time to scoop up some shares.

Wall Street analysts have a consensus one-year price target of $248.23 on the company (compared to the current share price of $268.16).