LPX  Stock Forecast: Explore Growth Through Innovation

Yuxiao YangThis LPX Stock Forecast article was written by Yuxiao Yang – Financial Analyst at I Know First.

Highlights

  • Housing growth is expected to accelerate further. This offers potential growth prospects for the U.S. wood paneling industry.
  • There is an increase of 10% in U.S. Single-Family Housing Starts s reported on April 19, 2022.
  • LPX recognized an increase of 20% in Siding Solutions Revenue. And there is an increase of 73% in innovative volume compared with 2021 Q1.
(Source: pxhere.com)

Overview

Louisiana-Pacific Corporation (NYSE: LPX) was founded in 1972, it is headquartered in Nashville, Tennessee, and operated 25 plants across the U.S., Canada, Chile, and Brazil. Mainly provide high-performance building solutions that meet the demands of builders, remodelers, and homeowners worldwide. Its products include innovative and reliable construction products and accessories. The company has four business segments: Siding, Oriented Strand Board (OSB), Engineered Wood Products (EWP), and South America.

Siding Solutions products consist of a full line of engineered wood siding, trim, soffit, and Fascia. OSB is a structural building product made from wood strands, arranged in layers, and bonded with resin and wax. EWP segment is comprised of LP SolidStart I-Joist (I-Joist), Laminated Veneer Lumber (LVL), and other related products. The South American segment manufactures and distributes OSB structural panel and siding products in South America and certain export markets.

Accelerating Siding Growth

At the beginning of the coronavirus pandemic in 2020, the federal funds rate target was lowered to near zero. Mortgage rates reach the record lowest level.  The rebound in the housing market has accelerated as the pandemic stabilizes, fueled by low inventory and historically low mortgage rates. Housing growth is expected to accelerate further. This offers potential growth prospects for the U.S. wood paneling industry.

In addition, high-income households achieved high levels of savings during the pandemic. There is an increase of 10% in U.S. Single-Family Housing Starts as reported on April 19, 2022. The number of housing starts is expected to continue rising. The increase in the number of private housing units, both single-unit and multi-unit developments, will also drive the demand for wood building material products.

According to the most recent 10-Q of LPX,  there is a gain on the sale of $39 million in the three-month period ended March 31, 2022, and there is a 31% increase in the net sales. LPX also recognized an increase of 20% in Siding Solutions Revenue. And there is an increase of 73% in innovative volume compared with 2021 Q1. LPX also enhances its shareholder’s return, it has paid a further $182 million to repurchase 2.9 million common shares, leaving $214 million remaining under the pre-existing $500 million share repurchase authorization.

*Data source: gurufocus.com
(Figure 1: LPX vs Construction Industry)

According to GuruFocus, LPX outperformed most of the companies in the Construction industry. LPX’s ROE is better than 99.81% of companies in the Construction industry. The Operating Margin is 41.64%, which is higher than 97.79% of companies in the industry. The ROA is 64.35%, which is higher than the 99.63% of companies in the industry.

*Data source: gurufocus.com

LPX has an F-score of 8, It is a positive signal that indicates a healthy situation of LPX. The Altman Z-score, which determines the result of a credit test, stays in the safe zone.

The Yahoo Finance coverage for the company is performed by 12 analysts: 1  and 2 of them take Strong Buy and Buy positions, while 6 of them take the Hold position. The analysts’ community puts the average target price for the stock at $81.13 while it is currently traded at $52.57.

Conclusion

As the housing market picks up, private housing improvement spending increases and housing starts increase, LPX will gain a huge value-added. The company’s product innovation strategy, especially the growth of the siding segment, will give us reasons to buy LPX. But we still need to keep an eye on supply chain shortages, inflation, and uncertainty in the housing market.

It is worth paying attention that the stock-picking AI of I Know First has a high signal on the one-year market trend forecasts, supporting my position for the LPX stock forecast. The light green for the short-term forecasts is mildly bullish, while the darker green is a strong bullish signal for the one-year forecast.

Past Success with LPX Stock Forecast

I Know First has been bullish on the LPX stock forecast in the past. On April 27th, 2022 the I Know First algorithm issued a forecast for LPX stock price and recommended LPX as one of the best stocks to buy. The AI-driven LPX stock prediction was successful on a 7-day time horizon resulting in more than 22.85%.

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Please note-for trading decisions use the most recent forecast.