PGT: Hurricane Gains

07/15/2015 8:00 am EST

Focus: STOCKS

Tom Bishop

Founder, BI Research

If you've never heard of our latest featured recommendation, join the club. Perhaps it's because you don't live in a hurricane zone, notes Tom Bishop, small-cap expert and editor of BI Research.

Founded in 1980, PGT Inc. (PGT) originally focused on window panel systems used to enclose porches to create more usable living space.

But after the destruction created by Hurricane Andrew in 1992, PGT established itself as Florida's leading manufacturer of impact-resistant windows and doors.

Today, its WinGuard line has over 3.5 million units installed (with no reported impact failures) and a 60% share of the Florida market.

Not only do these windows provide protection against high winds and impacts, they also save energy, reduce noise, offer UV protection and even make it much more difficult for an intruder to break in.

While 88% revenues come from hurricane-prone Florida, the company actually does business all along the Gulf Coast and up into the Carolinas, where there is plenty of market share to grab.

I should note that 19% of sales still come from non-impact resistant (traditional) windows and doors.

Sliced another way, 60% of PGT's Q1 revenues are derived from remodeling and repair (which grew 22% in Q1) and 40% from new construction (which grew 48%).

Of course, I should note that PGT's windows and doors are also used in commercial and industrial buildings.

PGT went through a couple rough years after the housing market in Florida crashed and the economy went into recession, but it's proud of the fact that it managed this and remained EBITDA positive.

Financially, revenues and earnings are now trending back up nicely. The consensus is based on seven analysts who see long-term growth running at 25%-30%.

In addition to a nice EPS growth story, the IBD composite rating for PGT is a highest possible 99 (and highest in the entire building products) and a relative strength rating of 96. We rate the stock a buy.

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