LPX

We rate LOUISIANA-PACIFIC CORP (LPX) as Avoid with a composite score of 33.7/100 at a current price of $85.25. The stock falls in the bottom quintile of our universe across key quantitative factors, and the multi-factor weakness suggests a high probability of continued underperformance.

The rating is primarily driven by strength in stability (60th percentile) and investment (41th percentile), which together account for the majority of the composite score. Offsetting weakness in momentum (24th percentile) and value (26th percentile) tempers our overall conviction. We assign a Narrow Moat rating (65/100), Medium uncertainty, and Standard capital allocation.

Key items to watch: momentum to confirm whether the current price trend has legs; valuation compression risk if growth disappoints. 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.

LOUISIANA-PACIFIC CORP holds a top-quartile position (#0 of 50) within the Construction sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 33.7/100 places it at rank #4232 in our full 7,333-stock universe. At $6.2B in market capitalization, LOUISIANA-PACIFIC CORP is a mid-cap player in the Construction space, which limits certain scale advantages but may allow for more agile strategic execution.

Revenue contraction of -19% combined with momentum at the 24th percentile paints a cautious picture of the near-term business outlook. The market appears to be pricing in continued challenges, and a catalyst for reversal is not clearly visible from current data.

The margin cascade tells an important story: gross margins of 24% (+0.5pp vs sector) narrow to operating margins of 11% (+4.1pp vs sector) and net margins of 8.4%, yielding a gross-to-net conversion rate of 35%. This efficient conversion suggests well-controlled operating costs and limited margin leakage between the gross and net levels.

At a current price of $85.25, LOUISIANA-PACIFIC CORP is trading at a premium to fundamental value. Our value factor score of 26/100 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. The premium valuation implies the market is pricing in significant future growth or quality improvements that are not yet fully reflected in current fundamentals.

The stock currently trades at a P/E of 23.2x (a 21% premium to the sector median of 19.1x), EV/EBITDA of 18.0x (at a premium), P/B of 3.3x, P/S of 2.0x. 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 LOUISIANA-PACIFIC CORP. The stock presents a balanced risk profile: weak quality scores (29th percentile). 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: weak quality scores (29th percentile). 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 60th percentile and quality factor at the 29th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: conservative leverage (20% D/E) limits balance sheet risk. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile is favorable for long-term investors.

We rate LOUISIANA-PACIFIC CORP's capital allocation as Standard. Management has shown adequate — though not exceptional — stewardship of shareholder capital. Returns on equity stand at 14.1%, and the balance sheet is managed within acceptable parameters (D/E: 20%). Exemplary allocators typically sustain ROE above 20% and D/E below 50%; LOUISIANA-PACIFIC CORP falls short on at least one dimension.

There is room for improvement in optimizing the capital structure or enhancing shareholder returns. The 1.24% dividend yield provides some income return, but the overall capital allocation framework would benefit from either higher reinvestment returns, improved balance sheet efficiency, or increased shareholder distributions. We will monitor for signs of strategic improvement that could warrant an upgrade.

In summary, LOUISIANA-PACIFIC CORP receives a Avoid rating with a composite score of 33.7/100 (rank #4232 of 7,333). Our quantitative framework assigns a Narrow Moat (65/100, trend: stable), Medium uncertainty, and Standard capital allocation. The average factor score across quality, value, momentum, stability, and investment is 36/100.

Our analysis does not support a constructive view on LOUISIANA-PACIFIC CORP at this time. The combination of the current quantitative profile, medium uncertainty, and standard capital allocation suggests unfavorable risk-reward at current levels. We recommend investors avoid new positions and existing holders consider reducing exposure.