Bank of America thinks investing in an insulation distributor and installer can yield investors nearly 22% upside. The bank began research coverage of TopBuild Tuesday with a buy rating and a $255 price target. Shares of TopBuild closed at $209.72 on Monday and are already ahead 32% since the start of 2023. The Daytona Beach, Florida-based company focuses on energy-efficient insulation, but also provides a broader supply of construction and building equipment. The company’s home services segment helps builders design more energy efficient houses. Analyst Rafe Jadrosich says TopBuild shares are poised to benefit from the company’s growth in residential construction, a strong valuation and return on invested capital (ROIC). Jadrosich added that TopBuild also stands to gain from homebuilders turning to only the most efficient providers. BLD YTD mountain TopBuild stock. “We expect TopBuild to outpace the residential construction market (40% market share) by leveraging its superior inventory management and ability to recruit/retain installers in a tight labor market,” Jadrosich said. Meanwhile, Jadrosich thinks TopBuild efforts to expand further into the non-residential market could fuel additional growth in the stock. TopBuild has an 11% market share in commercial insulation and 10% in mechanical insulation, according to the note. “Non-residential installation market is also consolidating and the breadth of BLD’s offering should drive share gains from more specialized players,” Jadrosich said. — CNBC’s Michael Bloom contributed to this report.
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