Description
Composite decking made from 95% recycled materials; one of the largest plastic film recyclers in the U.S.
Created
Mar 26, 2025 6:40 PM
URL
Circular Economy Involvement
Company Name
Trex Company
Cover Image
Industry/Subsector
Building Materials – Recycled Composite Lumber
Investment Thesis
Secular growth in composite decking; strong brand; proven pricing power; sustainability is core.
Market CapitalizationMarket Capitalization
Multi-selectMarket Capitalization
~$6–7 billion
Recent Financial Performance
~$1.1B revenue, ~$205M net income, ~19% net margin, ROE ~27%, low debt (debt/equity ~0.3)
Stock
Ticker
TREX
- Industry/Subsector: Building Materials – Recycled Composite Lumber
- Market Capitalization: ~$6–7 billion
- Circular Economy Involvement: Trex is the world’s largest manufacturer of wood-alternative decking and railing, famous for its composite deck boards made from 95% recycled materials. The company takes reclaimed wood fiber (sawdust) and waste polyethylene plastic (e.g. grocery bags, pallet wrap), and combines them into durable outdoor building products. By sourcing over 320 million pounds of waste plastic film in 2023 alone, Trex is one of North America’s largest plastic recyclers and a textbook circular economy company. Its products give new life to materials that would otherwise end up in landfills, and Trex decks last 25+ years – far longer than wood – thus reducing the frequency of material replacement. This commitment to circularity has been core to Trex’s brand for 30 years.
- Recent Financial Performance: Trex has grown rapidly over the past decade as composite decking gained popularity. In 2023, Trex’s revenue was $1.1 billion (roughly flat vs 2022 after a post-pandemic demand surge), and net income was $205 million. Despite a slight sales dip in 2022, Trex improved its gross margins to 41% in 2023, resulting in an ~11% increase in net profit. Net margin stood at a healthy 18–19%, and ROE was about 27% (trailing) – indicative of strong profitability and efficient use of capital. Trex carries little debt (debt/equity ~0.3) and generates strong cash flow, which it has reinvested in expanding production capacity and new product development.
- Investment Thesis: Trex offers a compelling long-term growth story underpinned by sustainability trends and consumer preferences. Homeowners and contractors are increasingly choosing composite lumber for its low maintenance and eco-friendly profile (each 20’ x 20’ deck uses ~1,500 lbs of recycled material). Trex’s strong brand and distribution give it a moat in this niche. Secular tailwinds – such as substitution of wood by composites and expansion into new outdoor living products – support continued growth. Trex has demonstrated pricing power and cost discipline (as seen in margin expansion), which should help navigate raw material volatility. For investors, Trex represents a unique small-mid cap opportunity to invest in a profitable, growing manufacturer that directly turns waste into a high-value consumer product. As the company stated, sustainability is in its DNA, and that focus is translating into real shareholder value.