Builders FirstSource, Inc. (BLDR): what the price assumes

In the published model solve dated 2026-Q2, anchored at $67.72, Builders FirstSource, Inc. (BLDR) is priced for +24.4% growth. boothcheck publishes no house fair value, target price, or buy/sell rating; individual model outputs and user-controlled scenarios are analytical inputs, not Boothcheck targets. Narrative composed 2026-07-25.

Generated: 2026-08-30 · Exported: 2026-08-31 · Source: https://boothcheck.com/report/BLDR

Headline

What The Price Assumes (Inversion)

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

The operating-margin figure is value-band context at year 12: derived from the framework's value band, a separate calculation — not part of the priced-in solve.

Solve inputs: computed at a 8.8% cost of capital with 4% terminal growth over a 5-year stage.

How unusual the bet is: elevated (limited comparison data)

Valuation X-Ray

Every valuation family lands below the price. The price therefore sits beyond what those standard frames encode.

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.

Families that call it expensive: Asset, Earnings, Relative

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 7.0%); the inversion above states its own rate.

Per-Model Detail (n=9)

Economic-Unit Decomposition (Sum Of The Parts)

Only one reportable economic unit is present in the current topology source. Consolidated operating lenses remain available, but there is no multi-unit decomposition.

No total common-equity value is stated. One or more material units lack a supported unit value. The displayed values are an indicative subtotal; consolidated debt and cash cannot be applied to a fraction of the company.

Solvency

Interest expense is not separately reported in the latest filings, so interest coverage cannot be computed.

Bullet Takeaways

• Four product categories carry roughly equal weight here, none of them more than about 27% of sales, and the profit lever sits in the manufactured and value-added lines the company says it is pushing into markets that lack them.
• The cycle is doing visible damage: the first-quarter 10-Q reports net sales of $3.3 billion, a 10.1% decrease from a year earlier and a swing to a net loss, while the price still asks for roughly 10.7% annual operating-profit growth over five years.
• Second-quarter results land on July 30, 2026, the first read on whether the spring building season stabilised volumes or extended the slide.

Bull Case

Pay $72.86 for Builders FirstSource and the market is asking you to accept roughly 18 dollars of price for every dollar of operating profit the business currently produces, which embeds something close to 10.7% annual growth in that profit over the next five years. Set that against a company whose sales just fell by a tenth and the demand looks unreasonable. It is less unreasonable than it first appears, because the rate is not the strange part. This company has grown at that pace before. The strange part is being asked to do it from a housing market that is currently shrinking.

What makes it possible is a mix shift the company has been executing for years. Builders FirstSource does not only move lumber from a yard to a job site. Its own 10-K describes a network that produces factory-built roof and floor trusses, wall panels, vinyl windows, custom millwork and trim, and management is explicit about where that goes next: it plans to accelerate this growth by further expanding our national manufacturing footprint to serve locations that do not currently have adequate access to these higher margin products. The long-term plan, in the company's words, rests on growing our sales of prefabricated components and other value-added products, increasing our market share. Translated, the bet is that a builder short of framing crews will pay for a wall that arrives finished rather than a stack of studs. Labour scarcity is the customer's problem and this company's product.

The structure of the customer base supports that patience. For the year ended December 31, 2025, the 10-K reports that our top 10 customers accounted for 14% of net sales, with our largest customer accounting for 4% of net sales. No single builder can dictate terms. That matters more than it sounds in a downturn, because a distributor with one dominant customer has to accept whatever pricing that customer demands when volumes fall, and this one does not.

Profitability through the trough is the quieter piece of evidence. The trailing operating margin of 4.9% is not impressive in isolation, but building-products distribution is a thin-margin trade by design: SITE runs about 5.1% at the operating line on roughly 4.7 billion dollars of revenue, and FND about 5.5% on 4.7 billion dollars. Delivering the same band while volumes contract is a sign the cost structure flexes rather than snaps. The company frames the source of that as scale, arguing that our integrated approach and scale allow us to compete effectively through our comprehensive product lines, prefabricated components and value-added services.

Then there is what management does with the cash. The share count has fallen roughly 11.6% a year over the four years to the end of March 2026, and the pace has not slowed with the cycle: the first-quarter statement of cash flows shows 300.1 million dollars of common stock bought back in that quarter alone, against 12.3 million dollars in the same quarter a year earlier. Against 861.6 million dollars of trailing free cash flow, that is a company retiring itself at speed while the market is unenthusiastic about the asset. A shrinking share count does not fix a shrinking market. It does mean each surviving share owns more of the recovery when it comes.

Bear Case

Mortgage rates set the demand curve for almost everything Builders FirstSource sells, and the company does not pretend otherwise. Its own list of what makes results swing from period to period leads with the cycle and then runs through lumber prices, competitors' pricing decisions, supply-chain disruption, and customers' production schedules. Not one of those is under management's control, and at the moment they are all pointing the same direction. The latest 10-Q cites third-party forecasts for both total and single-family United States housing starts to come in below 2025 levels this year. Affordability is the mechanism the 10-K names, warning that consumer preferences could shift to smaller homes in the future. This could cause homebuyer demand to soften or shift substantially. A smaller house needs fewer trusses.

That matters because of what the price is asking for. Roughly 10.7% annual operating-profit growth, sustained five years, is not a heroic rate on its own, and this company has cleared it before. Sustaining it is the harder part: of comparable fast-growers, only about 53% held that pace for five years. And the starting point is not neutral. The most recent quarter went backwards on both volume and profitability, from a positive 2.6% of sales at the net line to a negative 1.4%. Growth compounding from a base that is currently falling has to first stop falling, and every quarter spent doing that is a quarter subtracted from the five.

If the requirement is not met, the arithmetic is unforgiving in a specific way. None of the standard frames reaches today's price. It sits about 41% above where peer multiples land and about 171% above where the asset-value methods land, with the earnings-power and forward-growth frames also below it. That is not a fair-value argument, it is a description of where the support is: the price rests on growth arriving, not on what the balance sheet or the current profit stream defends. Remove the growth and there is no second leg.

A related discomfort sits underneath the book-based reads. Book value is 36.45 dollars a share, and the trailing return on equity is 7.3% against a cost of equity of 9.3%. A company earning less on its equity than that equity costs is quietly consuming value for as long as the condition lasts, and that gap is precisely why the book-based methods land where they do.

Competitive position is thinner than the scale story suggests. The 10-K states flatly that We compete in a highly competitive and fragmented marketplace, and the technology initiatives that are supposed to lock builders in carry the company's own caveat: There is no guarantee that such solutions will be effective, will be adopted by our customers, will be able to compete with alternative technology solutions. The value-added mix shift is real, but the lumber and sheet-goods category is still about a quarter of sales, and that category competes on price and delivery time against anyone with a yard and a truck.

The balance sheet is where the cycle gets amplified. Net debt of 4.54 billion dollars is 6.1 times operating profit, and operating profit is the thing currently compressing. The buyback that reads as conviction in the bull case reads differently here: 300.1 million dollars went out the door in a single quarter that produced a loss, funded by a business whose cash generation is levered to housing starts. Management's long-run framing is that the country remains underbuilt due to growth in the underlying demographics, which may well be true. Underbuilding over a decade does not pay a bill that comes due in five years.

Valuation

Start with the quarter, because it is what the price has to grow away from. The 10-Q for the period ended March 31 states that Net sales for the three months ended March 31, 2026, were $3.3 billion, a 10.1% decrease from net sales of $3.7 billion for the three months ended March 31, 2025. That is the base.

From there, today's price embeds roughly 10.7% annual growth in operating profit over five years, computed at a 9% cost of capital with 4% terminal growth. Two things about that assumption are worth separating. The rate itself is inside what the company has recently delivered, so the market is not demanding a step change in capability. The duration is the demanding part: of comparable fast-growers, only about 53% sustained that pace across five years. That requirement is also unusually sensitive to the discount assumption, since each additional percentage point of cost of capital moves the required growth by about 6.6 points.

The methods do not corroborate the price. It sits about 41% above where peer multiples land, about 109% above the earnings-power methods, and about 171% above the asset-value methods. Every family sits below. When that happens the price is not being defended by any standard frame; it is being carried by an expectation of what comes next. Two individual reads explain the spread. The zero-growth capitalisation of free cash flow, which simply treats 861.6 million dollars of annual free cash flow as a perpetuity that never grows, lands far under the price because it credits nothing for recovery. The exit-multiple cash-flow method comes closest, and it gets there by holding today's EV/EBITDA unchanged through the projection rather than assuming any expansion in that multiple. That is the honest split: the price needs the cycle to turn, and the methods that refuse to assume a turn cannot reach it.

What has to be true operationally is narrow. The trailing operating margin is 4.9%, on 14.8 billion dollars of revenue and 741.0 million dollars of operating profit. Growing operating profit at the required pace from that base means either volume recovery or margin expansion, and the company has been pursuing the second through mix. The 10-K notes that for reporting purposes our operating divisions are aggregated into one reportable segment, so the mix shift shows up as consolidated margin rather than as a segment the reader can track separately. It is worth noting that the four product categories are unusually balanced: none accounts for more than about 27% of sales, which spreads the mix bet across the whole business rather than concentrating it.

Against the cohort, the operating margin is ordinary rather than weak. SITE earns about 5.1% at the operating line and FND about 5.5%, both distributors in adjacent construction-adjacent markets; HD, structured as a retailer rather than a wholesaler, earns about 12.4%, which is a different business model rather than a benchmark for this one.

The balance sheet bounds the downside without cushioning it much. Net debt of 4.54 billion dollars is 6.1 times operating profit, which is manageable while cash flow holds and uncomfortable if it does not. Against that, the share count has been falling about 11.6% a year over the four years to March 2026, and the first-quarter statement of cash flows shows 300.1 million dollars of stock repurchased in that quarter. Capital is being returned aggressively into a downturn, which is a decision that looks good if the recovery arrives on schedule and looks expensive if it does not.

Catalysts

July 30, 2026 is the next hard data point. Builders FirstSource is scheduled to report second-quarter results that morning. The second and third calendar quarters are the seasonal peak for residential construction, so this print carries more signal than most: it will show whether the 10.1% first-quarter sales decline was the trough or the trend.

Guidance frames the year. The company's full-year 2026 outlook calls for net sales of $14.6 billion to $15.6 billion. The wide band is itself information, spanning a range that covers both a flat year and a materially worse one. Acquisitions continue at a modest pace alongside it: the 10-Q discloses the January 2, 2026 purchase of PBC for approximately 13.0 million dollars, extending the value-added product footprint rather than adding scale to the commodity lines.

The variable that outranks all of the above is the rate path. Housing starts drive volumes, mortgage rates drive starts, and the latest 10-Q points to third-party forecasts for 2026 starts below 2025 levels. A shift in the rate outlook would move the demand curve for this business faster than any operating initiative management can execute, in either direction.

Peer Cohorts (Per Segment, With Filing Citations)

Builders FirstSource (consolidated) (reported)

• FAST (FASTENAL CO)
• FY2025 10-K: …a change in the nature of that business strategy, or weaker than anticipated acceptance by customers of that business strategy. We cannot guarantee that our market potential estimates are accurate or that we will ultimately decide to expand our industrial vending or Onsite service models as we anticipate to reach the…
• FY2025 10-K: …0000815556 2025 FY false http://xbrl.sec.gov/country/2025#US http://xbrl.sec.gov/country/2025#US http://xbrl.sec.gov/country/2025#US iso4217:USD xbrli:shares iso4217:USD xbrli:shares xbrli:pure fast:segment 0000815556 2025-01-01 2025-12-31 0000815556 2025-06-30 0000815556 2026-01-21 0000815556 2025-12-31 0000815556…
• FND (Floor & Decor Holdings, Inc.)
• FY2025 10-K: …0001507079 false FY 2025 P3D P5D P2Y P3Y http://fasb.org/us-gaap/2025#AccountsPayableCurrent http://fasb.org/us-gaap/2025#AccountsPayableCurrent iso4217:USD xbrli:shares iso4217:USD xbrli:shares fnd:store utr:sqft fnd:design_studio fnd:state fnd:distribution_center fnd:reporting_unit xbrli:pure fnd:segment fnd:class…
• FY2025 10-K: Description of Securities* 10.1 FDO Holdings, Inc. Amended and Restated 2011 Stock Incentive Plan# S-1/A 333-216000 10.1 4/7/2017 10.2 First Amendment to FDO Holdings, Inc. Amended and Restated 2011 Stock Incentive Plan# S-1/A 333-216000 10.2 4/7/2017 10.3 Second Amendment to FDO Holdings, Inc. Amended and Restated…
• LOW (LOWE’S COMPANIES, INC.)
• FY2025 10-K: …the cost basis of the shares acquired in the consolidated statements of shareholders' deficit. Revenue Recognition - The Company recognizes revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those…
• FY2025 10-K: …brands, intensifying our localization efforts and expanding our rural assortment. In addition, we are dedicated to selling products sourced in a socially responsible, efficient, and cost-effective manner. Supply Chain We source our products from vendors worldwide and believe that alternative and competitive suppliers…
• SHW (THE SHERWIN-WILLIAMS COMPANY)
• FY2025 10-K: …http://fasb.org/us-gaap/2025#OtherAssetsCurrent http://fasb.org/us-gaap/2025#OtherAssetsNoncurrent http://fasb.org/us-gaap/2025#OtherAssetsCurrent http://fasb.org/us-gaap/2025#OtherAssetsNoncurrent http://fasb.org/us-gaap/2025#OtherLiabilitiesCurrent http://fasb.org/us-gaap/2025#OtherLiabilitiesNoncurrent…
• FY2025 10-K: …and other costs. While different for each specific environmental situation, these components generally each account for approximately 85 %, 10 % and 5 %, respectively, of the accrued amount and those percentages are subject to change over time. While environmental investigations and remedial actions are in different…
• TSCO (TRACTOR SUPPLY CO /DE/)
• FY2025 10-K: …of scale from increased volume of purchases, adjusting retail prices, and selectively buying from the most competitive vendors without sacrificing quality. 39 Table of Contents Item 8. Financial Statements and Supplementary Data INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page No. Reports of Ernst & Young LLP ,…
• FY2025 10-K: …notes are an integral part of these Consolidated Financial Statements. 45 Table of Contents TRACTOR SUPPLY COMPANY CONSOLIDATED BALANCE SHEETS (in thousands, except per share amounts) December 27, 2025 December 28, 2024 ASSETS Current assets: Cash and cash equivalents 194,109 251,491 Inventories 3,084,086 2,840,177…
• HD (HOME DEPOT, INC.)
• FY2025 10-K: …results represented our Primary segment. Therefore, a reconciliation to our consolidated totals is not applicable for fiscal 2023 or fiscal 2022. The following table presents net property and equipment, classified by geography: in millions February 2, 2025 January 28, 2024 January 29, 2023 Net property and equipment…
• FY2025 10-K: Statements of Comprehensive Income 41 Consolidated Statements of Stockholders' Equity 42 Consolidated Statements of Cash Flows 43 Notes to Consolidated Financial Statements 44 Note 1. Summary of Significant Accounting Policies 44 Note 2. Segment Reporting and Net Sales 51 Note 3. Property and Leases 54 Note 4.…
• POOL (POOL CORPORATION)
• FY2025 10-K: …renewal options, some of which involve rent increases. In addition to minimum rental payments, which are set at competitive rates, certain leases require reimbursement for taxes, maintenance and insurance. We do not believe that any single lease is material to our operations. Our sales centers range in size from…
• FY2025 10-K: …others. We distribute products through five networks: SCP Distributors (SCP), Superior Pool Products (Superior), Horizon Distributors (Horizon), National Pool Trends (NPT) and Sun Wholesale Supply (Sun Wholesale). Basis of Presentation and Principles of Consolidation We prepared the Consolidated Financial Statements…
• SITE (SiteOne Landscape Supply, Inc.)
• FY2025 10-K: …borrowers and the several banks and other financial institutions from time to time party thereto, and ING Capital LLC, as administrative agent, is incorporated by reference to Exhibit 10.16 to the Form S-1. 98 Table of Contents Exhibit Number Description 10.10 Amendment No. 3 to the Term Loan Credit Agreement, dated…
• FY2025 10-K: …in the agreement and are subject to more recent developments. Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time. Additional information about Holdings, its subsidiaries and affiliates may be found elsewhere in this Annual…

Methodology Note

• Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
• Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
• Economic-unit decomposition (SOTP): each disclosed business unit is assigned its native valuation basis before any multiple is applied. Operating units are valued on enterprise value; funded financial units are valued on their own common equity, because their borrowings fund earning assets rather than levering the parent. A company total is stated only once every material unit carries a supported value and the parent capital bridge reconciles.
• Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
• Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.

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.