TopBuild Corp (BLD): what the price requires

At today's price, TopBuild Corp (BLD) is priced for +13.5% growth. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.

Generated: 2026-07-14 · Exported: 2026-07-16 · Source: https://boothcheck.com/report/BLD

Headline

FieldValue
TickerBLD
CompanyTopBuild Corp
Current price$353.73/sh
CompositionInstallation Services 56% / Specialty Distribution 44%

What The Price Requires (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

FieldValue
Inversion basiswhole-company
Operating margin needed5.3%
Operating margin today14.7%
Margin compression implied-9.4pp
Implied growth13.5%
Multiple paid16x operating income

The operating-margin requirement is derived from the framework's value band at year 12, a separately labeled basis from the headline growth/duration solve.

Solve inputs: computed at a 9.8% cost of capital with 4% terminal growth over a 5-year stage; each 1pp of cost of capital moves the implied operating-profit growth ~6.3pp.

How unusual the bet is: within-range

ReferenceValue
vs own history-0.89σ
cohort percentile (of 225 peers)28
sustained it ~5 years at this level47%
implied end-window share0%

Valuation X-Ray

The price is justified by relative-multiple and growth-DCF; asset-based/earnings-power land below the price.

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

FamilyMedian price/FVModelsReads
Asset1.83x5expensive
Earnings2.03x4expensive
Relative1.07x3expensive
Growth0.83x3justifies

Families that justify the price: Relative, Growth Families that call it expensive: Asset, Earnings

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 7.2%); the inversion above states its own rate.

Per-Model Detail (n=15)

ModelFamilyFVPrice/FVApplicableMethodology
DCF Perpetual GrowthGrowth$746.600.47xyesFCF base $0.7B, growth 7% (input: historical growth), terminal g 4.0%, WACC 7.2%, 6yr projection
DCF Exit MultipleGrowth$427.450.83xyesExit EV/EBITDA: 11.1x / 13.1x / 15.1x (bear / base = today's held flat / bull), 6yr
Relative ValuationRelative$329.101.07xyesP/E 18x (static sector reference · 2026-04), scenarios: 15.0x / 18.0x / 21.0x (bear / base = reference held flat / bull), EV/EBITDA 12x
Simple DDMGrowth——no—
Two-Stage DDMGrowth——no—
Simple Excess ReturnAsset$193.371.83xyesBV/sh $85.47, ROE (TTM) 20.9%, ke 9.3%
Two-Stage Excess ReturnAsset$288.431.23xyes5yr excess ROE then converge to ke=9.3%
Discounted Future Market CapGrowth$278.691.27xyesRev $5.6B, growth 7% (input: historical growth; tapered), Terminal P/S: 1.5x / 1.8x / 2.1x (bear / base = today's held flat / bull, cap 8x)
Growth-Adjusted P/ERelative——no—
Margin TrajectoryGrowth——no—
Earnings Power ValueEarnings$182.491.94xyesNormalized EBIT (5y avg op income, one-time charges added back) $0.78B × (1−25%) / WACC 7.2% → EPV (no growth)
Residual IncomeAsset$275.241.29xyesBV $85.47 + 5yr PV of (ROE (TTM) 20.9% − Kₑ 9.3%) × BV; BV grows 8.8%/yr
Graham NumberAsset$184.911.91xyes√(22.5 × EPS $17.78 × BVPS $85.47) — Graham's conservative floor
EV/EBITDA RelativeRelative$314.571.12xyesEBITDA $0.98B × sector EV/EBITDA 12.0x
FCF YieldEarnings$167.512.11xyesFCF $704.4M / Kₑ 9.3% — zero-growth perpetuity
SBC-Adj FCF YieldEarnings$161.272.19xyesSBC-adj FCF $0.69B (FCF $0.70B − SBC $0.02B) capitalized at Kₑ
Ben Graham FormulaEarnings$14.9023.74xyesEPS $17.78 × (8.5 + 2×-5.0%) × (4.4 / 5.3%) (excluded from median)
ROIC-Justified P/BAsset$29.2712.09xyesBV $85.47 × (ROIC 2.5% / WACC 7.2%)
P/Sales SectorRelative$499.610.71xyesRevenue $5.62B × sector P/S 2.5x
PEG Fair ValueRelative——no—
Earnings YieldEarnings$192.221.84xyesEPS $17.78 / required return 9.3% (Rf 4.3% + ERP 5.0%)
Funds From Operations MultipleRelative——no—
Clinical Phase NPVGrowth——no—
MertonAsset——no—
V5 Mechanical———no—

Solvency

FieldValue
Net debt$2.6b
Net debt / NOPAT (after-tax)4.37x
Net debt / operating income (pre-tax)3.28x
Interest coverage7.7x
Share count CAGR (buyback)-3.9%
Burning cashno

Bullet Takeaways

TopBuild now trades as a pending-deal situation: in April 2026 QXO agreed to acquire it for approximately 17 billion dollars, so the price near 426 dollars reflects the takeout, not a standalone estimate.

The standalone business is a scale-advantaged building-products compounder, pairing Installation Services and Specialty Distribution for combined buying power, with a 14 percent operating margin, a return on equity near 21 percent, and about 1.9 billion dollars of M&A deployed in the year.

The cyclical risk is real: management guides 2026 residential sales down mid-single digits on rates and affordability, and the conservative valuation methods land in the 300s, the likely reset level if the QXO deal were to break.

Bull Case

The balance sheet at TopBuild tells the story of a company that compounded its way to scale and then drew a buyer. The business runs net debt of about 2.58 billion dollars against trailing operating income near 789 million, a manageable 3.3 times with interest coverage above 6 times, and it generates roughly 700 million dollars of free cash flow a year. That cash has been the engine of the strategy: management deployed about 1.9 billion dollars on acquisitions in the past year, completing seven deals that added roughly 1.2 billion dollars of annual revenue. A company that can self-fund nine-figure tuck-in M&A while buying back stock, with the share count down about 4 percent, is one whose management has earned confidence in its own model.

The model itself has a real structural advantage rooted in scale. TopBuild runs two segments, Installation Services and Specialty Distribution, and the 10-K is explicit that operating both together "provides us with a number of distinct competitive advantages," starting with "the combined buying power of our two business segments" (accession 0001558370-25-001495). Buying insulation in bulk for both the distribution arm and the install arm gives TopBuild a cost edge that smaller, single-channel competitors cannot match. With a 14 percent operating margin and a return on equity near 21 percent, the franchise earns well above its cost of capital.

The strongest validation of the bull case is that a strategic acquirer agreed with it. In April 2026 QXO entered a definitive agreement to acquire TopBuild for approximately 17 billion dollars. That deal anchors the equity to a concrete value rather than to a speculative forward thesis, and it reflects an outside party paying up for exactly the scale, cash generation, and M&A engine the bull case describes. For a holder, the standalone compounding story now sits underneath a defined takeout, which sharply changes the risk profile.

Bear Case

The structural truth a TopBuild holder must confront is that the price is no longer about the building-products business; it is about a pending deal, and the multiples reflect what has been agreed rather than what the company has earned. In April 2026 QXO agreed to acquire TopBuild for roughly 17 billion dollars, so the stock now trades largely as a merger-arbitrage situation. The price at about 426 dollars embeds the expectation that the deal closes on the agreed terms. That introduces a different risk set than fundamentals: regulatory review, financing, and any condition that could delay or break the transaction. If the deal falls through, the stock would likely reset toward its standalone value, where the conservative valuation methods sit well below the current quote.

On the standalone business, the cyclical reality is sobering. TopBuild's largest end market is residential construction, and management itself guides 2026 residential sales to decline by mid-single digits, citing subdued consumer confidence, elevated interest rates, and affordability problems. Quarterly EBITDA margins are guided to swing with seasonality and a competitive pricing environment. This is a housing-cycle business at a moment when housing is under pressure, and the inverted price implies operating growth of about 22 percent per year for five years, a pace only about 35 percent of comparable fast-growers have sustained. Absent the deal, that is a demanding bet against a softening residential backdrop.

The valuation methods, stripped of the deal premium, are unanimous that the standalone business is worth less. The asset and earnings-power families land far below the price: normalized Earnings Power Value near 172 dollars, the excess-return reads near 193, and the relative read at an 18 times sector P/E near 329. Only the growth-DCF reaches the price, and even it requires optimistic inputs. The implication is clear: most of the gap between the standalone fair value and the 426 dollar price is the QXO takeout premium. The bear case is that a holder buying here is underwriting deal completion, and the downside if it breaks is a return to a cyclical building-products multiple in a weak housing market.

Valuation

TopBuild's valuation has two layers, and the deal sits on top. In April 2026 QXO agreed to acquire the company for approximately 17 billion dollars, so the current price of about 426 dollars largely reflects that takeout rather than a standalone intrinsic estimate. Inverting the price the ordinary way shows roughly 19 times company-wide operating income, implying about 22 percent annual operating growth for five years, a figure that reads as within range historically but is really a proxy for the deal premium rather than an organic growth expectation.

Underneath the deal, the standalone model families cluster well below the price, which quantifies how much of the value is the takeout. The asset-based family lands between roughly 193 and 288 dollars on book value of about 85 dollars per share and a return on equity near 21 percent. The earnings-power family lands between about 167 and 192 dollars on normalized operating income and free cash flow. The relative family lands near 314 to 329 dollars at a mid-teens sector multiple. Only the growth-DCF reaches the price, near 480 to 680 dollars on optimistic settings. The honest center of gravity for the standalone business is somewhere in the 300s, below the agreed deal-driven price.

The practical read is that this is now a risk-arbitrage holding more than a fundamental one. The balance sheet is sound, with net debt at 3.3 times operating income and interest coverage above 6 times, so there is no solvency concern. The relevant questions are deal-specific: the spread to the agreed price, the probability and timing of close, and the regulatory path. A buyer at 426 dollars is principally betting that the QXO transaction completes; the standalone valuation, anchored by the conservative methods, is the floor if it does not, and it sits a meaningful distance below.

Catalysts

The QXO acquisition is the dominant catalyst by a wide margin. On April 19, 2026 QXO entered a definitive agreement to acquire TopBuild for approximately 17 billion dollars, which now governs the stock more than any operating result (TopBuild Form 425). The catalysts that matter are the steps toward close: regulatory clearance, any shareholder vote, financing confirmation, and the closing timeline. The spread between the current price and the agreed consideration is the market's running estimate of deal risk.

The standalone earnings and guidance cadence remains the fundamental backstop. TopBuild guided 2026 sales to 5.925 to 6.225 billion dollars and adjusted EBITDA to 1.005 to 1.155 billion, while signaling mid-single-digit residential declines and low-single-digit commercial and industrial growth, with quarterly EBITDA margins ranging from about 16.5 percent to 18.5 percent (TopBuild 8-K, Globe and Mail transcript). These figures define the value the stock would revert toward if the deal did not close.

The housing cycle is the macro catalyst underneath both. The residential softness management cites, driven by elevated interest rates and affordability, is the key variable for the standalone business; a turn lower in rates would support volumes, while continued pressure would weigh on results (Motley Fool transcript). The watch items are the QXO deal's progress and timing first, then the residential demand trajectory and margin durability as the fundamental floor.

Peer Cohorts (Per Segment, With Filing Citations)

Installation Services (reported)

Specialty Distribution (reported)

Methodology Note

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.

View the full interactive BLD report on boothcheck