The company offers a wide range of products for outdoor living spaces, siding, lighting, furniture and outdoor kitchens, among others.

Trex does not sell directly to consumers, but operates through major distributors such as Home Depot and Lowe's, as well as independent distributors.

This approach enables the company to concentrate on manufacturing and product innovation without having to manage the relationship with the end customer. However, this strategy creates a strong dependence on its distributor partners to promote and sell its products. Three of these distributors alone generate 72% of Trex Residential's revenues, which exposes the company to risk should any of these partners change their commercial strategy, reduce their orders or cease to collaborate with Trex.

Trex's main competitive advantage lies in its ability to use recycled materials in the manufacture of its products. The company combines reclaimed wood fibers and recycled polyethylene to create composites that mimic the appearance of wood. This process enables Trex to reduce its material costs, with purchase prices of $0.05 to $0.3 per pound, compared with $0.6 to $0.7 for competitors using traditional wood.

These imitations retain the aesthetic appearance of wood, without its defects. Trex products require no maintenance (treatment against rot, discoloration or pests).

Trex decks cost half as much over 25 years.


Trex Company, with a market capitalization of $9.5 billion, is the market leader ahead of The Azek Company ($6.8 billion). In 2023, Trex sales reached $1.1 billion. The average annual growth rate over the last five years is 12%. After peaking in 2021, boosted by post-COVID outdoor craving, revenues fell by 8.5%. With inflation on the rise, non-essential expenses such as decking have taken a back seat.

Although Trex Company does not pay dividends, it boasts a payout ratio of 60%. Over the past ten years, net earnings per share have registered a compound annual growth rate of 19.5%. With over $957 million spent on share buybacks, the number of shares outstanding has been reduced by 15%. However, these buybacks were not regular. In 2022, Trex invested $400 million in share buybacks, but in 2023, it reduced this amount to $17 million. It is also notable that the company holds no debt.

Its free cash flow margins have also been reduced since 2020. The reason? Trex has invested heavily in increasing its production capacity. The company is building a new plant in Arkansas at a projected cost of $450 million.

These strategic initiatives should enable Trex to capitalize on an addressable market estimated at $13.7 billion and pursue its expansion. The company forecasts double-digit growth, targeting $1.9 billion by 2028, and expects to improve margins by 5 percentage points. International expansion, the conversion from wood to composite and the upturn in construction in the United States are expected to drive this positive dynamic.

In the short term, forecasts for the second half of 2024 are conservative, with an expected decline in revenues and gross margins. After a first quarter in which distributors increased their inventories to meet anticipated demand, the second half of the year should see a decline in production.

By way of comparison, here is a table showing Trex 's main competitors listed on the stock exchange: