I expect to see a long, multiyear uptrend for the housing market — including companies involved in homebuilding, suggests Frank Curzio, editor of Curzio Venture Opportunities.

Cornerstone Building Brands (CNR) is a small-cap manufacturer of exterior building products. It’s the leading maker of vinyl windows, vinyl siding, insulated metal panels, and metal roofing & wall systems in North America.  

Cornerstone sells its products directly to major homebuilders and general contractors, as well as distributors and big box retailers like Home Depot and Lowes. It owns dozens of brands, including the massive Ply Gem line of building products.  It makes everything you’d need for the outside of a residential or commercial building.

And it’s seeing surging demand across all its business lines. Cornerstone recently reported results that showed 29% growth in net sales, year-over-year (YoY). The strength was across the board: its windows business grew over 35%, siding was up 27% and its commercial segment grew 23%.

Commercial construction tends to lag the overall economy, which means this business line should become a bigger growth driver next year (following this year’s economic recovery).

Plus, Cornerstone is in great financial shape. The latest quarterly results included free cash flow (FCF) of $155 million—a 109% increase vs. a year ago. Meanwhile, management has been steadily lowering the company’s leverage over the past two years. Its net debt is now less than five times its earnings before interest, taxes, depreciation, and amortization (EBITDA).

Cornerstone is on track to deliver around $1.85 in earnings per share this year. With the stock trading around $16-$17, that means we can buy shares for less than 10x forward earnings.

The stock is especially cheap if you look at the company’s earnings history. In 2018, Cornerstone generated $1.45 in EPS. In mid-2018, the stock traded well above the $20 level… hitting as high as $23. By contrast, the stock is sitting around $16 right now — even though Cornerstone’s EPS is likely to end up above $1.85 this year.

In other words, we can buy the stock for a much lower price today, even as its earnings are set to jump much higher. This stock should be trading much closer to the old $23 level — about 40% higher than the current price.

Based on the steady uptrend in the housing market, Cornerstone could easily generate 70%-100% of upside for us over the next 12-18 months. It’s a fantastic low-risk/high-reward opportunity right in the middle of an incredible growth market.

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