Builders FirstSource scores 84 for management and 57 for moat. The management score rests on a return on invested capital of 6.8% and a gross margin of 29.0% — figures that describe a business turning capital into profit efficiently. Debt sits at 1.30x equity. The moderate moat and exceptional management are not the same judgement, and the gap between them is where the argument about this business sits.
Three independent anchors set the price worth paying. Growth is modelled at 12.2% a year, the rate measured from the filings. The exit multiple assumed is 24.3x. That produces an intrinsic value of $17.23, a 10-CAP price of $65.95 and a payback time price of $91.50, with the value zone set at the highest of the three, $91.50. Today's price of $57.35 sits inside that zone.
A business scoring this well, trading inside its value zone, is the combination the framework exists to find — which is also the reason to check why the market disagrees. A margin of safety score of 15 describes the cushion, not the certainty.
| Price | $57.35 |
| Market cap | $6.2B |
| P/E ratio | 63.0x |
| Return on invested capital | 6.8% |
| Gross margin | 29.0% |
| Debt to equity | 1.30x |
| Free cash flow yield | 7.4% |
| Growth rate used | 12.2% |
| Growth rate measured | 12.0% |
| Exit multiple assumed | 24.3x |
| Company | Moat | Buy price |
| Armstrong World Industries (AWI) | 88 | $90.70 |
| Simpson Manufacturing Co Inc (SSD) | 82 | $175.30 |
| Fortune Brands Innovations I (FBIN) | 15 | $35.92 |
| Trex Company Inc (TREX) | 64 | $25.60 |
Every number above is built on assumptions that can be changed. In Moatly you can move the growth rate, the exit multiple and the margin of safety and watch every figure recalculate, so you are testing your own view of Builders FirstSource rather than accepting ours.