What a time it’s been for Installed Building Products. In the past six months alone, the company’s stock price has increased by a massive 48.7%, reaching $266.14 per share. This was partly thanks to its solid quarterly results, and the performance may have investors wondering how to approach the situation.
Is now the time to buy Installed Building Products, or should you be careful about including it in your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free.
Why Is Installed Building Products Not Exciting?
We’re glad investors have benefited from the price increase, but we don't have much confidence in Installed Building Products. Here are three reasons you should be careful with IBP and a stock we'd rather own.
1. Lackluster Revenue Growth
We at StockStory place the most emphasis on long-term growth, but within industrials, a stretched historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Installed Building Products’s recent performance shows its demand has slowed significantly as its annualized revenue growth of 3.5% over the last two years was well below its five-year trend. 
2. Revenue Projections Show Stormy Skies Ahead
Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.
Over the next 12 months, sell-side analysts expect Installed Building Products’s revenue to drop by 3.1%, a decrease from its 13.2% annualized growth for the past five years. This projection is underwhelming and implies its products and services will face some demand challenges.
3. Recent EPS Growth Below Our Standards
While long-term earnings trends give us the big picture, we also track EPS over a shorter period because it can provide insight into an emerging theme or development for the business.
Installed Building Products’s unimpressive 5.3% annual EPS growth over the last two years aligns with its revenue trend. This tells us it maintained its per-share profitability as it expanded.
Final Judgment
Installed Building Products isn’t a terrible business, but it isn’t one of our picks. Following the recent surge, the stock trades at 26.6× forward P/E (or $266.14 per share). While this valuation is fair, the upside isn’t great compared to the potential downside. We're fairly confident there are better investments elsewhere. Let us point you toward one of our top software and edge computing picks.
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