Doman Building Materials Group Ltd. (DBM-T)

One of his two choices in the space. Prefers the providers of building supplies rather than homebuilders themselves.

Sawmills and other building material sites in Canada and US. Building out larger US presence through acquisition. Earnings were fine, but stock dropped. Revenue far below expectations, but cashflow in line. Great job managing inventory and cash to pay dividend. Homebuilding should remain strong. He's looking to top up his position.

DBM operates as a wholesale distributor of building materials and home renovation products, and is now trading at 8.9x times' Forward P/E. In the last five years, growth was solid around 16% (one large acquisition in 2021), DBM recently experienced a revenue decline for the first time in many years; trailing twelve-month revenue declined around -13% compared to FY2022. The balance sheet is leveraged with net debt of $725M, and net debt/EBITDA is around 4.2x. Overall, a very cheap stock, but the leverage profile is still a possible concern, especially for a cyclical downturn (if interest rates and inflation remain challenging). For a cyclical name, we would be more comfortable waiting till the leverage level get down to a more sustainable level. Its small size also adds some risk, and based on consensus earnings are expected to be flat next year. 
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Billy Kawasaki’s Insights - Billy’s most-liked answers from 5i Research. Recent reported EPS and revenues missed estimates. A sharp rise in materials prices were pointed as reasons. Sales increased by 83.3%, partially due to acquisitions and the rest due to materials pricing. The equity position has increased significantly. The company’s financials are in pretty good shape and continue to grow top and bottom lines. Unlock Premium - Try 5i Free