Installed Building Products (IBP) is one of the nation’s largest insulation installers for residential new construction of single- and multi-family homes, notes Doug Gerlach, editor of SmallCap Informer.
The company holds an overall 28% market share in U.S. insulation installation. In addition to its main business line in new home construction, the company also serves existing home remodeling/repair and commercial construction needs.
Since 2015, Installed Building Products has grown revenues at an annualized 18.9% and EPS at an annualized 36.7%. For the full 2021 year, IBP fared quite well, with sales growing 19.1% and EPS gaining 107.3%.
Acquisitions are a key part of IBP’s growth strategy. In 2021, Installed Building Products completed 12 acquisitions representing $211 million of annual revenues, more than doubling its $100 million acquired revenue target for the year.
Demand for increased energy efficiency is a key driver for IBP’s services. Strong demand for both new home construction and upgrades to existing homes will continue to provide opportunities. In the near-term, orders have outstripped ability to provide services given supply chain issues, but this pent-up demand should drive results in months ahead.
Given Installed Building Product’s success, analysts project future EPS growth could reach 36% a year through 2027. We project sales growth at 14% and EPS growth of 15% in the same period.
A slowdown in housing construction could adversely impact IBP’s business, but inflation, especially in energy prices, could boost interest in energy efficiency that would benefit the company,
Assuming a high P/E ratio of 30.5 is reached in the next five years, our EPS estimate would support a high price of $416. On the downside, a low P/E of 15.4 and FY 2021’s EPS of $4.01 would indicate a low price of $62.
The current P/E is 23.0, which is the same as our adjusted average P/E. From recent prices, a compound annual return of 35.1% is possible, and the upside/downside ratio is 10.6-to-1.
