Is it Time to Buy the Dip in Trex Stock or Will the Correction Continue?

Sentiment surrounding TREX has been split

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Like most stocks today, Trex Company, Inc. (NYSE:TREX) is on the decline, last seen down 4.3% at $89.29 as it sets its sights on its lowest close since late-March. The stock has been the victim of a pretty rough selloff this month. losing 33.8% this year already, and headed for its eighth-straight loss today. In fact, all but one of the security's last 12 sessions has ended in the red, and it just broke back below the formerly supportive 320-day moving average late last week. 

trex jan 24

Recent coverage from UBS did little to help the stock. Last Thursday, UBS started with a "neutral" rating, and a somewhat lofty $111 price target. This put the 12-month consensus price target at $126.50 -- a hefty 41.3% premium to current levels. Meanwhile, just five analysts consider TREX a "strong buy," compared to seven "hold" or worse ratings. 

Short-term options traders are still call-biased, though. This is per the security's Schaeffer's put/call open interest ratio (SOIR) of 0.43, which stands higher than just 16% of readings from the past year. 

Moreover, Trex Company has increased its revenues and net income 64% and 69%, respectively, since fiscal 2018. In addition, TREX has a fairly manageable balance sheet with $54.04 million in cash and $36.94 million in total debt. However, Trex stock’s valuation is on the higher end with TREX trading at a price-earnings ratio of 55.25 and a price-sales ratio of 14.54, making it likely for Trex stock to continue to trending downward as part of a correction.


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