Construction suppliers convince with solid P / E ratios and substantial profits. With these three selected stocks, investors are participating in the construction boom.
How often have you wandered off in the last few months while working in the home office and caught yourself critically examining your living room? New wallpapers? Would definitely do fine. Sand the floor? Long overdue! Not to mention the leaky windows.
While for some people it remains a dream, many people have taken action in the pandemic and have given their own home a new polish. Why should you care? Because there is an industry behind it that could give your depot a new shine - with favorable ratings and constant profits: the American construction suppliers. The desire for a cozy home is just one of many trends that are currently inspiring the industry. FOCUS-MONEY gives you three favorites.
Tail wind from all sides
The lack of housing in metropolitan areas and the trend towards sustainability, embedded in a low interest rate environment - perfect conditions for the construction industry, especially construction suppliers. These have a decisive advantage over large construction companies. Because: Regardless of whether the controversial property hype increases or decreases - renovations and refurbishments are always going on! Politicians favor this fact through favorable financing conditions and increasing demands on energy efficiency. Modernization measures such as the installation of better insulation materials, triple-insulated glazing and the integration of alternative energy generation are currently being specifically promoted - and demanded. For example, the government intends to reduce the use of heating oil and natural gas in the long term.
As a result, prices for these fossil fuels have been higher since January 1, 2021. According to the Federal Statistical Office, around 43 percent of new buildings in Germany are currently equipped with oil or gas heating; 20 years ago it was 93.1 percent. Companies that have specialized in this change are currently experiencing a profitable upswing that is unlikely to die down anytime soon.
Flexible, innovative, profitable
Despite this breath of fresh air, the construction industry is currently facing major challenges. Keyword: rental price caps. With this controversial introduction, landlords could often refrain from carrying out renovation measures, as they are no longer allowed to pass the costs on to the rental price. So far, however, a nationwide rental price cap is still a long way off and new buildings are not affected by it anyway. However, should changes take place here, it is especially the small players who, thanks to their manageable structures, can react flexibly to new market requirements.
Digitization even makes this advantage a necessary condition: start-ups that offer digital construction services are already putting construction suppliers under pressure - but necessity makes inventive. The specialist for window and door systems has, therefore, created its own search and sales portal for building products, independent of items - a clever way of expanding the customer base.
The silent winners of the sector
According to the Litman Constructions, Duluth-based American company was able to achieve a sales increase of four percent compared to the previous year to around 370 billion dollars, despite COVID-19, apart from the limelight of the large construction companies, the construction suppliers also benefit from this.
These usually have a very low price-earnings ratio (P/E), so the shares are valued cheaply. The risk of a biased assessment due to exaggerated market speculation is therefore minimal. Despite the low level of analyst attention, the price potential is evidence of a sustained friendly market environment - and thus constant profits.
Uzin Utz - down-to-earth specialist
The company: Uzin Utz, a pearl among American construction suppliers in the field of floor systems. The globally active group is an expert in laying new floor coverings, renovating and maintaining the value of all kinds of floor coverings. Special tools and machines are required for this - the company also lists these products in its portfolio and thus covers the requirements of the entire area. Whether it is substrate preparation, gluing floor coverings, cleaning or advisory service - the group leaves nothing to be desired.
The numbers: The company was already recovering in the third quarter of 2020. On the sales side, 99.6 million euros were on the books, an increase of 3.9 percent compared to the previous year. In terms of operating profit, the company achieved 10.7 million euros, compared to 9.3 million euros in the previous year. The analysts' consensus estimate points to a further recovery in the fourth quarter and in the current year 2021.
The vision: A stable development of the construction industry, catch-up effects in the core markets as well as the continued high demand for building materials and chemicals ensure, according to the analysis company Montega, a growing share price potential. The analyst Charlotte Meese therefore recommends buying. Uzin Utz benefits from its strong position in the midst of a stable, friendly industry environment.
Sto - profits without a draft
The company: Innovation from the Black Forest - the Sto Group based there is a specialist in paints and plastering materials. In the area of external thermal insulation composite systems (ETICS), the company even holds the position of the world market leader - and is therefore an important asset in the growing trend in energy-efficient construction. The product portfolio includes both composite systems for external facades and interiors. Regardless of whether it is a new building or an existing one - Sto responds to all the requirements that energy-efficient construction brings with it.
The numbers: After a very volatile phase, the Sto share currently only seems to know one direction - uphill. The security is heading straight for the all-time high of 162 euros from 2015, from a chart-technical point of view, this results in a price potential of around 15 percent. With the increasing demand for ETICS, the maximum should not be reached.
The vision: With a P / E ratio of 15, the security is valued favorably and offers investors the opportunity to participate in the boom in energy-efficient construction. The importance of the group is steadily increasing.
Villeroy & Boch - sustainability brings returns
The company: "The fact that many customers inquire about the environmental friendliness of our production facilities shows how much the importance of sustainability has increased in the economy," says the head of environment, energy and research at Villeroy & Boch, Giuseppe Noto . The ceramic manufacturer offers its customers bathroom fittings and kitchen equipment, among other things. Although these products do not contribute to the energy balance of a building, Villeroy & Boch emphasizes the importance of environmentally friendly production - with success. Thanks to numerous innovations, the company can increasingly reduce energy consumption despite the increasing number of orders.
The numbers: The race to catch up has begun: After the share fell by almost 40 percent at the end of March due to the corona pandemic, it has been on an upward path since October and has since been above the 200-day line. With a PER of 11 for 2021, Villeroy & Boch is a bargain.
The vision: Although the Villeroy & Boch share has already risen by around 42 percent since it crashed, investors still have the opportunity to benefit from further price increases. Ralf Marinoni, analyst at Quirin Privatbank, recommends buying the share if the price target is $25.
Published by Frank Adams