Azek Company Inc (AZEK)AZEK

A Comprehensive Overview of Azek Company Inc. (NYSE: AZEK)

Company Profile

History and Background: AZEK Company Inc. was founded in 2004 and went public in June 2021. The company manufactures and distributes PVC and composite building products, including deck, railing, trim, and molding. AZEK is a leading provider of these products in the US and Canada.

Core Business Areas:

• Decking: AZEK offers a wide range of PVC and composite decking products under the TimberTech and AZEK brands. These products offer durability, low maintenance, and a variety of aesthetic options.
• Railing: AZEK manufactures and sells railing products under the Fortress and Westbury brands. These railings are made from PVC, composite, and aluminum and are available in various styles and colors.
• Trim & Moulding: AZEK provides PVC and composite trim and moulding products used for doors, windows, and other architectural features. These products provide a weather-resistant and low-maintenance alternative to traditional wood trim.

Leadership Team & Corporate Structure: AZEK is led by CEO Jesse Singh, who has extensive experience in the building products industry. The company has a Board of Directors composed of industry experts and executives with experience in finance, manufacturing, and marketing.

Top Products and Market Share

Top Products: AZEK's top products include:

• TimberTech AZEK decking, a high-performance PVC decking product.
• Fortress railing, a premium aluminum railing system.
• AZEK Trim, a weather-resistant PVC trim board.

Market Share: AZEK is a leading player in the North American market for PVC and composite decking, railing, and trim. The company's market share varies by product category, but it is estimated to be around 20% for decking and 30% for railing.

Competitors: AZEK's main competitors in the PVC and composite building products market include:

• Trex Company (NYSE: TREX)
• CertainTeed Corporation (a subsidiary of Saint-Gobain)
• West Fraser Timber Co. Ltd. (NYSE: WFG)

Total Addressable Market

The total addressable market (TAM) for AZEK's products is estimated to be over $10 billion in North America. This includes the markets for decking, railing, and trim, which are growing due to increasing demand for low-maintenance and durable building materials.

Financial Performance

Revenue and Profitability: AZEK's revenue has grown significantly in recent years, from $395 million in 2019 to $739 million in 2022. The company's net income has also increased, from $26 million in 2019 to $94 million in 2022. AZEK's profit margins are relatively high, with a gross margin of 43.8% and an operating margin of 16.5% in 2022.

Cash Flow and Balance Sheet: AZEK has a strong financial position, with $219 million in cash and equivalents and $225 million in long-term debt as of December 31, 2022. The company's free cash flow was $91.5 million in 2022.

Dividends and Shareholder Returns

Dividend History: AZEK initiated a dividend in 2022, paying out $0.16 per share for the full year. This translates to an annual dividend yield of approximately 0.6%.

Shareholder Returns: AZEK's stock has performed well since its IPO in June 2021, with total returns of over 100%.

Growth Trajectory

Historical Growth: AZEK has experienced strong historical growth, with revenue increasing at a compound annual growth rate (CAGR) of 25% over the past three years.

Future Projections: AZEK expects to continue growing at a healthy pace in the future. The company projects revenue growth of 15-20% in 2023.

Growth Initiatives: AZEK is investing in several growth initiatives, including:

• Expanding its product offerings into new categories
• Increasing its distribution channels
• Entering new geographic markets
• Investing in research and development to develop innovative products

Market Dynamics

Industry Trends: The PVC and composite building products industry is expected to grow at a CAGR of 5-7% over the next five years, driven by factors such as:

• Increasing demand for low-maintenance building materials
• Growing popularity of outdoor living spaces
• Rising disposable income

Competitive Landscape: AZEK is well-positioned in the competitive landscape, with a strong brand, a differentiated product offering, and a solid financial foundation. The company's main competitors include Trex, CertainTeed, and West Fraser Timber.

Potential Challenges and Opportunities

Key Challenges: Some of the key challenges AZEK faces include:

• Rising raw material costs
• Labor shortages
• Intense competition

Potential Opportunities: AZEK has several potential opportunities, such as:

• Expanding into new product categories, such as fencing and pergolas
• Increasing its presence in international markets
• Developing new partnerships with building professionals

Recent Acquisitions

In the past three years, AZEK has made several acquisitions, including:

• Deckorators (2020): This acquisition expanded AZEK's product offerings into composite railing and decking.
• Clage (2021): This acquisition strengthened AZEK's position in the European market and provided access to new technologies.

These acquisitions are part of AZEK's strategy to expand its product offerings, enter new markets, and increase its scale.

AI-Based Fundamental Rating

Based on AI analysis of AZEK's financials, market position, and growth prospects, the company receives a fundamental rating of 7.5 out of 10. This rating reflects AZEK's strong financial performance, leading market share, and positive growth outlook.

Sources and Disclaimer

This analysis was conducted using information from the following sources:

• AZEK Company Inc. financial statements
• AZEK Company Inc. investor presentations
• Industry reports
• News articles
• AZEK Company Inc. website: https://azekco.com/

The information provided in this overview is for informational purposes only and should not be considered as investment advice. Please consult with a financial professional before making any investment decisions.

Summary

AZEK Company Inc. is a leading player in the North American PVC and composite building products market, with a strong track record of growth. The company has a differentiated product offering, a strong brand, and a solid financial foundation. AZEK is well-positioned to benefit from the growing demand for low-maintenance building materials and the increasing popularity of outdoor living spaces. However, the company faces challenges from rising raw material costs and intense competition.