Once they took the ProBuild plunge, shares soared.

Two months ago, when Builders FirstSource acquired Denver-based ProBuild Holdings, investors pounced on the opportunity to have a stake in the company. Now, many experts are saying the BLDR stock is still “enough of a bargain to be worth buying,” according to a company statement.

One sign of this comes from company director Craig Arthur Steinke, who recently acquired 16,000 shares of Builders FirstSource on June 11, paying $12.41 per share, and lifting his stake in the company to 150,632 shares total.

Steinke’s purchase breaks a trend of massive insider swelling at Builders FirstSource, evident over the past year. According to SEC filings, insiders have sold 2 million more shares than they’ve bought of the company over the past 12 months. In addition to that, the past three months have seen 2.6 million more shares insider-sold than bought, as insider buying basically ground to a halt. Steinke’s is the only reported instance of insiders paying up to acquire the stock, versus five reported insider sales in the past three months.

So does this purchase sound the “all clear” for outside investors? Is it now safe to resume buying?
“Hardly,” says Evan Hansen of Insider Monkey. “While the attraction of owning a stock on a tear is undeniable, you still need to keep a close eye on the price of the stock you’re buying.”

Hansen says that in the case of Builder’s FirstSource, the company is valued at 93 times earnings—and it’s even more expensive when you factor in the company’s $372 million in net debt.

“Even if analyst estimates of Builder’s FirstSource’s long-term growth prospects (30 percent annualized over the next five years, according to Yahoo! Finance) prove accurate, 93 times earnings is an awful lot to pay for that growth,” Hansen says. “Adding to the danger, Builder’s FirstSource pays its shareholders no dividend whatsoever, such that if the stock disappoints on earnings going forward (and it’s missed its last four “earnings estimates” — did we mention that?), and investors decide to punish it, a buyer today won’t even have the comfort of regular dividend checks to lessen the sting of the capital losses.”

1 Comment

  1. I actually have this in my portfolio at the moment. Got in this in April of 2014 so I’m pretty happy right now with my ROI.

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