Boise Cascade has been treading water for the past six months, recording a small return of 1% while holding steady at $118.86. The stock also fell short of the S&P 500’s 7.5% gain during that period.
Is now the time to buy Boise Cascade, or should you be careful about including it in your portfolio? Get the full breakdown from our expert analysts, it’s free.We're sitting this one out for now. Here are three reasons why BCC doesn't excite us and a stock we'd rather own.
Why Do We Think Boise Cascade Will Underperform?
Formed through the merger of two lumber companies, Boise Cascade Company (NYSE:BCC) manufactures and distributes wood products and other building materials.
1. Revenue Tumbling Downwards
We at StockStory place the most emphasis on long-term growth, but within industrials, a stretched historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Boise Cascade’s recent history marks a sharp pivot from its five-year trend as its revenue has shown annualized declines of 10.8% over the last two years. 
2. EPS Took a Dip Over the Last Two Years
While long-term earnings trends give us the big picture, we also track EPS over a shorter period because it can provide insight into an emerging theme or development for the business.
Sadly for Boise Cascade, its EPS declined by more than its revenue over the last two years, dropping 33.2%. This tells us the company struggled to adjust to shrinking demand.
3. New Investments Fail to Bear Fruit as ROIC Declines
A company’s ROIC, or return on invested capital, shows how much operating profit it makes compared to the money it has raised (debt and equity).
We typically prefer to invest in companies with high returns because it means they have viable business models, but the trend in a company’s ROIC is often what surprises the market and moves the stock price. Unfortunately, Boise Cascade’s ROIC has decreased significantly over the last few years. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities.
Final Judgment
Boise Cascade doesn’t pass our quality test. With its shares underperforming the market lately, the stock trades at 11.9× forward price-to-earnings (or $118.86 per share). While this valuation is fair, the upside isn’t great compared to the potential downside. There are better stocks to buy right now. We’d recommend looking at Wingstop, a fast-growing restaurant franchise with an A+ ranch dressing sauce.
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