Why Shares of Builders FirstSource, Inc. Popped 16% Today

By Travis Hoium Markets Fool.com

What happened

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Shares of Builders FirstSource, Inc. (NASDAQ: BLDR) jumped as much as 15.9% in trading Wednesday after reporting fourth-quarter results. By 2:25 p.m. EST, shares had slipped slightly, but were still up 12.8% on the day.

So what

Sales rose 6.3% in the quarter, to $1.55 billion, and net income came to $18.3 million, up from a loss of $0.3 million a year ago. Results topped the $1.5 billion in revenue expected by Wall Street, and adjusted earnings of $0.16 per share were double what analysts were expecting.

Image source: Getty Images.

Management didn't give much in the way of guidance for 2017, but they did say they expected to grow revenue and expand operating margins.

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Now what

If management is successful in growing the business and expanding margins, we could see a big improvement from $1.27 per share in earnings in 2016. That could mean the stock is a great value, trading at 11.5 times trailing earnings, even after the stock's jump today.

Investors should watch how margins trend in the coming year and whether or not the company can ride the wave of homebuilding to growth. Right now, however, it appears to be well positioned for the future.

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Travis Hoium has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.