Building materials supplier Boise Cascade Company (BCC) has been one of the fastest growing companies in the infrastructure industry, and its share price performance is tracking its potential earnings growth. The stock has gained 32.9% over the past three months, and 21.3% over the past month. However, analysts expect the stock to decline 10.2% in the near term to hit $55.

In contrast, BCC’s EPS is expected to rise 645.2% year-over-year to $2.31 in the most recent quarter ended March 31, 2021. Its annual EPS is expected to hit $6.12 in its fiscal year 2021, up 37.8% from the same period last year. A consensus revenue estimate of $1.56 billion for the about-to-be-reported quarter indicates a 32.9% improvement from the year-ago value.

Thus, we think the company’s potential price decline, driven by exogenous factors, should be the perfect entry point into the stock.

Click here to check out our Infrastructure Sector Report for 2021

Here’s what could drive the company’s performance in the near term:

Leading Position in the US Infrastructure Industry

BCC has gained 201.5% over the past year, outperforming the benchmark Global X U.S. Infrastructure Development ETF’s (PAVE) 119.8% returns. In terms of year-to-date performance,  BCC’s 35.1% returns are more than 15 percentage points higher than PAVE’s returns.

The company’s stock  is poised to continue this rally over  the long run, driven by potentially hefty federal investments in the infrastructure space. President Biden’s $2 trillion infrastructure proposal allocates $621 billion to the public infrastructure and electric vehicles market, and approximately $300 billion each to  affordable housing, drinking water infrastructure, and electric grid construction.

As a leading producer of integrated wood products and building materials, BCC should grow significantly this year, driven by  industry tailwinds. The company’s multiple expansion projects over the past year, including a new shop in Texas and facility distribution centers in key markets, should allow it to become a top player in the domestic infrastructure industry. Also, tightening housing market inventory and rising demand for home  construction should drive BCC’s sales in the coming months.

Operations as a Going Concern

BCC has maintained its growth trajectory over the past year with impressive financials. The company’s trailing-12-month revenues came at $5.74, up 17.9% year-over-year. Its ebitda and EPS rose 91.9% and 115.5%, respectively, year-over-year. And its  trailing-12-month gross profit and operating income stood at $938.79 million and $329.28 million, respectively.

BCC maintains a solid liquidity position, as indicated by its $405.38 million trailing-12-month cash balance and $294.52 million net operating cash flow. Though BCC has a slightly higher total-debt-to-equity ratio of 63.9%, it has a debt/free cash flow ratio of 2.78, and a covered ratio of 11.49. The company’s trailing-12-month levered free cash flow came at $160 million.

Trading at a Discounted Valuation

In terms of non-GAAP forward p/e, BCC is currently trading at 10.47x, 53.2% lower than the industry average  22.39x. The stock’s trailing-12-month PEG of 0.12x is 88.7% lower than the industry average of 1.06x.

BCC’s forward price/sales and price/cash flow multiples of 0.42 and 4.90, respectively, compare favorably with industry averages.

Favorable POWR Ratings

BCC has an overall A rating, which equates to Strong Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.

BCC has an A  grade for Value and Growth, which is in sync with the company’s impressive earnings growth over the past year and relative undervaluation.

BCC is ranked #2 of 6 stocks in the A-rated Industrial – Wood industry. In addition to the grades I’ve highlighted, one  can check out BCC Ratings for Sentiment, Stability, Momentum, and Quality here.

There are three companies in the Industrial – Wood industry with an overall rating of A. Click here to view them.

Bottom Line

BCC’s earnings growth potential based on the White House’s proposed infrastructure plan should offset  its projected losses if corporate taxes rise 700 basis points to 28%, as part of the $2 trillion proposal. While  concerns regarding a potential fourth coronavirus wave might lead to a short-term pullback, we think the stock is poised to grow significantly, overcoming the challenges.

Click here to check out our Infrastructure Sector Report for 2021

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BCC shares were trading at $65.07 per share on Tuesday afternoon, up $1.15 (+1.80%). Year-to-date, BCC has gained 36.40%, versus a 9.10% rise in the benchmark S&P 500 index during the same period.

About the Author: Aditi Ganguly

Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities. More...

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