UFP Industries, which makes lumber and other building products, has set up in a new base as the company's business picks up and the stock market attempts a new rally. That makes this member of the IBD 50 worthy of your list of growth stocks to buy or watch.
Grand Rapids, Mich.-based UFP has 216 locations in eight countries making wood and wood-alternative products for retail, construction and industrial customers. It's been on an acquisition binge, buying nine companies in 2021. Lumber prices have been trending higher since hitting a low in August 2021.
UFP ranks No. 2 in its building-wood group, according to Stock Checkup, which rates stocks based on fundamental and technical strength. Other highly rated stocks in the group include Boise Cascade, Louisiana-Pacific and West Fraser Timber. The group itself occupies the No. 19 slot in IBD's 197 industries groups, up from No. 23 three weeks ago, though down from No. 12 six weeks ago.
Strong Earnings Growth For UFP Industries
The company's earnings mushroomed 117% in the fourth quarter to record levels, blasting past analyst views.
"Our new market-focused organizational structure is helping us to better identify growth opportunities, and we are more strategically investing our capital," said CEO Matthew J. Missad in remarks accompanying the Q4 report. "These investments, coupled with the addition of new value-added products and very strong demand, have resulted in unprecedented growth."
The company's results came amid what Missad said he hopes were "once-in-a-lifetime Covid-19 disruptions, as well as normal production and delivery challenges."
UFP's average earnings growth the past three quarters was 110%. In the past three years, UFP's average growth rate was 54% on average sales growth of 25%. Such results have helped lift the company's Earnings Per Share Rating to a perfect 99.
UFPI stock is also a member of the Stock Spotlight, which augments its credentials as a potential growth stock to buy.
Growth Stocks To Buy And Watch: UFPI's Base
UFPI stock has carved out a cup-with-handle base, according to MarketSmith. The cup started on Jan. 5 when the stock peaked at 94.80. It descended 21% to 74.87 to mark the cup's bottom and then rallied to 88.28. That set the high of the handle. The buy point is 10 cents above the handle's high, or 88.38.
The stock's relative strength line is trending higher and at its highest level since May 2021, a bullish sign.
The only missing ingredients that would complete the recipe for this potential growth stock to buy is a breakout above the buy point and a return of the stock market to a confirmed uptrend. Both could happen within days.
