Like many big buzz IPO stocks, Facebook (FB) and Alibaba (BABA) stumbled after their initial public offerings, then went on to big gains. Insulation products leader TopBuild (BLD) has followed a similar path and may be laying the foundation for another breakout run.
XAutoplay: On | OffFrom its first post-IPO weekly close on May 18, 2012, Facebook fell 54% over the next four months. It wasn’t until July 2013 that the social media giant broke out and launched a fivefold run.
Alibaba also declined in its second week of trading following its September 2014 initial public offering. Although the Chinese e-commerce leader managed to form an IPO base a few weeks later, its gains were short-lived, as its stock went into a multiyear slump. It wasn’t until the beginning of this year that Alibaba began a sustained upward move.
In similar fashion, TopBuild tried to head higher following its July 2015 IPO, but then went through a long period of roller-coaster action until launching a strong breakout at the end of February of this year.
Since then, TopBuild’s share price rose as much as 70% before pulling back to form its current consolidation, a flat base with a 67.37 entry.
Note that it’s a later-stage base and those entail more risk than a first- or second-stage pattern.
74% Annual EPS Growth
TopBuild sports a three-year annual earnings growth rate of 74%, and has posted average EPS gains of 39% over the last three quarters.
Sales growth has been less impressive, coming in at just 8%, on average, over the last three years. But top-line gains have been rising over the last two quarters, reaching a double-digit gain of 10% in the second quarter.
The Florida-based company is set to report Q3 numbers on Nov. 7 after the close. Analysts expect a 33% rise in earnings.
In afternoon trading Monday, TopBuild was trading just over 64, putting it within 5% of the potential buy point.
Note that it’s risky to buy a stock, particularly one forming a later-stage pattern, just before it reports. It’s usually better to wait to see how the company reports and how the market reacts.
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