GMS: Building A Building Distribution Empire

seekingalpha05-19

GMS is a leading specialty distributor of construction products which shows impressive growth and delivers on solid margins.The company has quadrupled its sales over the past decade and has seen ...

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}\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nGMS: Building A Building Distribution Empire\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-05-19 19:11 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4694367-gms-building-a-building-distribution-empire><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>GMS is a leading specialty distributor of construction products which shows impressive growth and delivers on solid margins.The company has quadrupled its sales over the past decade and has seen ...</p>\n\n<a href=\"https://seekingalpha.com/article/4694367-gms-building-a-building-distribution-empire\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"GMS","symbol_name":"GMS Inc.","start_time":0,"source_url":"https://seekingalpha.com/article/4694367-gms-building-a-building-distribution-empire","article_id":"2436760166","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1399023627/image_1399023627.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2436760166","pubTimestamp":1716117063,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"Moreover, the company managed to grow operating margins to the mid-single digits towards 8% of sales on a trailing basis, providing another earnings driver on top of the topline sales growth. This kind of growth has been outright impressive and while the company has issued shares to finance part of this growth, dilution has been limited to 30%, resulting in real strong sales and earnings growth on a per-share basis. This has been well reflected in the share price as a $20 stock in 2016, traded at these levels pre-pandemic, and subsequently rose to the $100 mark in recent weeks. About The Valuation, And Another Growth Impetus I am picking up the valuation story around the summer of 2023 when the company posted its annual results. The company posted a 15% increase in full-year sales to $5.33 billion, with operating profits improving to $505 million. Net earnings of $333 million came in at $7.82 per share on a GAAP basis, based on a diluted share count of 42 million","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"GMS":"GMS Inc.","BK4104":"贸易公司与经销商"},"translate_title":"GMS：建立建筑分销帝国","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"GMS":1},"content_text":"GMS is a leading specialty distributor of construction products which shows impressive growth and delivers on solid margins.The company has quadrupled its sales over the past decade and has seen strong sales and earnings growth on a per-share basis.The valuation of GMS is reasonable, but the cyclicality of the business should be considered before investing, as the company is on the acquisition tour here.Catherine Delahaye GMS (NYSE:GMS) is a leading North American specialty distributor of construction products, an interesting business which I have unfortunately never covered before. The company has seen impressive growth over the past decade, having delivered on solid (margin) growth, which certainly has been reflected in the share price in recent years. The performance is very strong as current valuation multiples look quite reasonable, yet recognizing the cyclicality in the underlying business, I am concluding to keep a close eye on the shares here, willing to consider on dips. Providing Value To Contractors And Builders GMS is a specialty distributor of building products which has been founded in the early 1970s. The company is a substantial distributor, employing over 7,000 team members, which distribute some 60 brands from over 300 distribution yards and related centers. With leading expertise, and a one-stop solution being offered, GMS provides a critical link between key suppliers and a large customer base. The company by now generates over $5 billion in sales per annum, of which 40% is tied to wallboard. Complementary products make up 30% of sales, with the remainder of sales generated from the distribution of steel framing and ceilings. In terms of end markets, the company is split pretty evenly between residential and commercial end markets. While these end markets are not necessarily very exciting, the company has seen incredible growth over the past decade. Over this ten-year time window, the company has grown revenues from $1.3 billion to $5.3 billion, quadrupling its sales! Moreover, the company managed to grow operating margins to the mid-single digits towards 8% of sales on a trailing basis, providing another earnings driver on top of the topline sales growth. This kind of growth has been outright impressive and while the company has issued shares to finance part of this growth, dilution has been limited to 30%, resulting in real strong sales and earnings growth on a per-share basis. This has been well reflected in the share price as a $20 stock in 2016, traded at these levels pre-pandemic, and subsequently rose to the $100 mark in recent weeks. About The Valuation, And Another Growth Impetus I am picking up the valuation story around the summer of 2023 when the company posted its annual results. The company posted a 15% increase in full-year sales to $5.33 billion, with operating profits improving to $505 million. Net earnings of $333 million came in at $7.82 per share on a GAAP basis, based on a diluted share count of 42 million shares. Moreover, leverage was quite reasonable at 1.4 times. Shares traded around the $70 mark at the time, granting the company a $3.0 billion equity valuation, for a near $4.0 billion enterprise valuation with net debt approaching the billion mark. This valued the activities at around 0.75 times sales. By year-end 2023, GMS announced that it has entered into an agreement to acquire Kamco Supply, a New York-based distributor of construction materials which adds some $245 million, or nearly 5% to pro forma sales. Towards the end of February, the company reported its third quarter results and amidst a higher interest rate and deflationary pricing environment, the company has posted largely flattish results. Through the first three quarters of the year, the company grew sales by just 1% and change to $4.1 billion. Amidst higher expenses across the board, the company posted net earnings of $220 million, down from $257 million in the same period last year. Amidst minimal share buybacks, the company saw GAAP earnings fall from $6.01 to $5.35 per share, based on a share count of 40 million (and some) shares. Note that the stagnation looks worse than it is, as the mix shows solid volume gains offsetting deflationary pricing trends here. Net debt remains stable just below the billion mark, with leverage ratios reported at 1.5 times. Note that this is ahead of the deal with Kamco which closed early in March. It was disappointing to learn that the company now announced that Kamco generated $235 million in sales in the year ending in December, some $10 million less than reported before. Moreover, a $321 million price tag was announced, implying that over a 1.3 times sales multiple has been paid, marking a big premium compared to the own business. In May, GMS announced a bolt-on purchase of Howard & Sons, a single-location distributor in South Carolina, with no financial details being announced. And Now? Later in May, GMS announced a CAD $196 million deal to acquire Yvon. The Canadian-based building supplies provides services to customers in the wider Toronto and Ontario regions with the distribution of drywall, insulation, steel, ceilings and others. With a CAD $190 million sales contribution, the company is valued at around 1 times sales, a multiple which is more in line with GMS here. With 40 million shares trading at $93, the market value of the firm has risen to $3.7 billion, for an enterprise valuation of closer to $4.7 billion ahead of the latest deals. This values GMS at just below 1 times sales, albeit that a near billion net debt load will increase towards $1.5 billion upon the latest string of dealmaking. Still, leverage ratios are likely seen at 2 times, or just above that. The question, however, is what earnings will look like. A near $8 per share number reported in 2023 is not really attainable to be replicated here, and while earnings will likely come in around $7 per share, the question is what the future looks like from here onwards, after sales were quite stable so far this year. Nonetheless, even at $7, the earnings multiples are rather modest at 13-14 times, albeit that leverage ticks up a bit here (but deals might drive earnings growth as well). Furthermore, these are cyclical industry, although aided by structural shortages, as the business has seen strong growth and margins in recent years.  Amidst all this, I am not keen on chasing the shares here, but happy to get acquainted with the stock here, as I am looking to learn more about the business and shares going forward.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":null,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.24.2","shortVersion":"4.24.2","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2436760166"}