Builders FirstSource, Inc. (BLDR) is Attracting Investor Attention: Here is What You Should Know

Builders FirstSource (BLDR) is one of the stocks most watched by Zacks.com visitors lately. So, it might be a good idea to review some of the factors that might affect the near-term performance of the stock.Over the past month, shares of this construction supply company have returned +9.1%, compared to the Zacks S&P 500 composite's -0.4% change. During this period, the Zacks Building Products - Retail industry, which Builders FirstSource falls in, has gained 0.1%. The key question now is: What could be the stock's future direction?While media releases or rumors about a substantial change in a company's business prospects usually make its stock 'trending' and lead to an immediate price change, there are always some fundamental facts that eventually dominate the buy-and-hold decision-making.Earnings Estimate RevisionsRather than focusing on anything else, we at Zacks prioritize evaluating the change in a company's earnings projection. This is because we believe the fair value for its stock is determined by the present value of its future stream of earnings.Our analysis is essentially based on how sell-side analysts covering the stock are revising their earnings estimates to take the latest business trends into account. When earnings estimates for a company go up, the fair value for its stock goes up as well. And when a stock's fair value is higher than its current market price, investors tend to buy the stock, resulting in its price moving upward. Because of this, empirical studies indicate a strong correlation between trends in earnings estimate revisions and short-term stock price movements.For the current quarter, Builders FirstSource is expected to post earnings of $2.19 per share, indicating a change of -38.3% from the year-ago quarter. The Zacks Consensus Estimate has changed -17.2% over the last 30 days.For the current fiscal year, the consensus earnings estimate of $11.55 points to a change of -20.8% from the prior year. Over the last 30 days, this estimate has changed -2.4%.For the next fiscal year, the consensus earnings estimate of $11.97 indicates a change of +3.7% from what Builders FirstSource is expected to report a year ago. Over the past month, the estimate has changed -2.4%.Having a strong externally audited track record, our proprietary stock rating tool, the Zacks Rank, offers a more conclusive picture of a stock's price direction in the near term, since it effectively harnesses the power of earnings estimate revisions. Due to the size of the recent change in the consensus estimate, along with three other factors related to earnings estimates, Builders FirstSource is rated Zacks Rank #4 (Sell).The chart below shows the evolution of the company's forward 12-month consensus EPS estimate:12 Month EPSProjected Revenue GrowthWhile earnings growth is arguably the most superior indicator of a company's financial health, nothing happens as such if a business isn't able to grow its revenues. After all, it's nearly impossible for a company to increase its earnings for an extended period without increasing its revenues. So, it's important to know a company's potential revenue growth.In the case of Builders FirstSource, the consensus sales estimate of $3.88 billion for the current quarter points to a year-over-year change of -6.4%. The $16.46 billion and $17.32 billion estimates for the current and next fiscal years indicate changes of -3.7% and +5.2%, respectively.Last Reported Results and Surprise HistoryBuilders FirstSource reported revenues of $4.23 billion in the last reported quarter, representing a year-over-year change of -6.7%. EPS of $3.07 for the same period compares with $4.24 a year ago.Compared to the Zacks Consensus Estimate of $4.47 billion, the reported revenues represent a surprise of -5.22%. The EPS surprise was -0.65%.Over the last four quarters, Builders FirstSource surpassed consensus EPS estimates three times. The company topped consensus revenue estimates two times over this period.ValuationNo investment decision can be efficient without considering a stock's valuation. Whether a stock's current price rightly reflects the intrinsic value of the underlying business and the company's growth prospects is an essential determinant of its future price performance.While comparing the current values of a company's valuation multiples, such as price-to-earnings (P/E), price-to-sales (P/S) and price-to-cash flow (P/CF), with its own historical values helps determine whether its stock is fairly valued, overvalued, or undervalued, comparing the company relative to its peers on these parameters gives a good sense of the reasonability of the stock's price.As part of the Zacks Style Scores system, the Zacks Value Style Score (which evaluates both traditional and unconventional valuation metrics) organizes stocks into five groups ranging from A to F (A is better than B; B is better than C; and so on), making it helpful in identifying whether a stock is overvalued, rightly valued, or temporarily undervalued.Builders FirstSource is graded A on this front, indicating that it is trading at a discount to its peers. Click here to see the values of some of the valuation metrics that have driven this grade.Bottom LineThe facts discussed here and much other information on Zacks.com might help determine whether or not it's worthwhile paying attention to the market buzz about Builders FirstSource. However, its Zacks Rank #4 does suggest that it may underperform the broader market in the near term.5 Stocks Set to DoubleEach was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2024. While not all picks can be winners, previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Builders FirstSource, Inc. 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