BXC

We rate BlueLinx Holdings Inc. (BXC) as a Reduce with a composite score of 43.1/100 at a current price of $69.67. The quantitative profile shows weakness across multiple dimensions, suggesting limited upside potential and elevated risk of underperformance relative to peers over the next 12 months.

The rating is primarily driven by strength in value (56th percentile) and investment (40th percentile), which together account for the majority of the composite score. Offsetting weakness in momentum (36th percentile) and quality (37th percentile) tempers our overall conviction. We assign a No Moat rating (35/100), Medium uncertainty, and Poor capital allocation.

Key items to watch: momentum to confirm whether the current price trend has legs. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

BlueLinx Holdings Inc. holds a top-quartile position (#0 of 50) within the Wholesale Trade sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 43.1/100 places it at rank #3114 in our full 7,333-stock universe. At $585M in market capitalization, BlueLinx Holdings Inc. is a small-cap player in the Wholesale Trade space, which limits certain scale advantages but may allow for more agile strategic execution.

Revenue is growing at 6%, though momentum at the 36th percentile suggests the market has not yet fully recognized this trajectory. This potential disconnect between fundamental improvement and market recognition could represent an opportunity for patient investors if the growth trend persists.

The margin cascade tells an important story: gross margins of 15% (-7.6pp vs sector) narrow to operating margins of 2% (-1.6pp vs sector) and net margins of 0.4%, yielding a gross-to-net conversion rate of 3%. The significant margin erosion from gross to net suggests elevated operating expenses, high interest costs, or other structural drags that warrant monitoring.

At a current price of $69.67, BlueLinx Holdings Inc. is trading near fair value based on current fundamentals. Our value factor score of 56/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. Valuation metrics are mixed, with no strong signal of mispricing in either direction.

The stock currently trades at a P/E of 48.0x (a 151% premium to the sector median of 19.1x), EV/EBITDA of 6.4x (discounted to peers), P/B of 0.9x, P/S of 0.2x. The above-sector P/E multiple suggests the market is pricing in superior growth or quality, which our analysis finds only partially justified by current fundamentals.

We assign a Medium uncertainty rating to BlueLinx Holdings Inc.. The stock presents a balanced risk profile: below-average price stability (40th percentile) and elevated valuation multiple (P/E 48.0x) that leaves limited margin for error. While not risk-free, the core business fundamentals are adequate to withstand moderate economic stress, and the range of potential outcomes around our fair value estimate is manageable.

Specific risk factors that inform our assessment include: below-average price stability (40th percentile); elevated valuation multiple (P/E 48.0x) that leaves limited margin for error. Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 40th percentile and quality factor at the 37th percentile provide a quantitative summary of the overall risk landscape.

We identify limited risk mitigants at this time, which contributes to our medium uncertainty assessment. Investors should monitor for improvement in balance sheet metrics, margin stability, and business predictability that could warrant a downgrade in our risk assessment over time.

We rate BlueLinx Holdings Inc.'s capital allocation as Poor. Key concerns include low returns on equity (1.9%), weak asset returns (ROA 0.8%). Exemplary capital allocators generate ROE above 20% and maintain conservative leverage — BlueLinx Holdings Inc. significantly underperforms these benchmarks, raising questions about management's ability to create shareholder value.

Investors should scrutinize management's reinvestment decisions and balance sheet trajectory before committing capital. Poor capital allocation often compounds over time: overlevered balance sheets limit strategic flexibility, while low returns on capital destroy shareholder value. We would need to see sustained improvement in profitability metrics and balance sheet discipline before considering an upgrade.

In summary, BlueLinx Holdings Inc. receives a Reduce rating with a composite score of 43.1/100 (rank #3114 of 7,333). Our quantitative framework assigns a No Moat (35/100, trend: stable), Medium uncertainty, and Poor capital allocation. The average factor score across quality, value, momentum, stability, and investment is 42/100.

Our analysis does not support a constructive view on BlueLinx Holdings Inc. at this time. The combination of limited competitive advantages, medium uncertainty, and poor capital allocation suggests unfavorable risk-reward at current levels. We recommend investors avoid new positions and existing holders consider reducing exposure.