NX

Quanex Building Products CORP holds a top-quartile position (#0 of 50) within the Manufacturing sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 50.2/100 places it at rank #1979 in our full 7,333-stock universe. At $652M in market capitalization, Quanex Building Products CORP is a small-cap player in the Manufacturing space, which limits certain scale advantages but may allow for more agile strategic execution.

Revenue is growing at 86%, though momentum at the 48th 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 26% (-16.2pp vs sector) narrow to operating margins of -10% (-11.0pp vs sector) and net margins of -11.5%, yielding a gross-to-net conversion rate of -44%. The significant margin erosion from gross to net suggests elevated operating expenses, high interest costs, or other structural drags that warrant monitoring.

We do not assign Quanex Building Products CORP a meaningful economic moat, scoring 34/100 on our composite assessment. The ROIC-WACC spread of -33.2% is the primary signal of economic value creation. Current fundamentals do not demonstrate the kind of durable competitive advantages — such as superior returns on invested capital, margin superiority, or reinvestment efficiency — that would protect the company from competitive erosion over the long term. The highest-scoring pillar, growth durability, reached only 11.6/20.

The strongest moat sources are growth durability (11.6/20) and reinvestment efficiency (9.9/20). Rev growth 86%, 10yr history. Capital turnover 2.98x. These pillars form the core of Quanex Building Products CORP's competitive identity and are the primary drivers of excess returns in our framework.

Areas of relative weakness include economic value creation (0.3/20) and financial resilience (4.3/20). ROIC -24.8% vs WACC 8.4% (spread -33.2%). Improvement in these areas could meaningfully widen the moat over time, while deterioration would be an early warning of competitive erosion.

Our moat trend assessment is Stable. Multi-year ROIC and operating margin trajectories show neither meaningful improvement nor deterioration, suggesting the competitive position is steady. We expect Quanex Building Products CORP's moat profile to remain largely unchanged absent a material shift in return on capital or industry dynamics.

At a current price of $22.18, Quanex Building Products CORP is trading at a premium to fundamental value. Our value factor score of 38/100 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 P/B of 1.4x, P/S of 0.6x. We evaluate these multiples in the context of both absolute levels and sector-relative positioning to form our valuation view.

Key profit drivers include robust top-line growth of 86% expanding the revenue base. The margin cascade from 26% gross to -10% operating to -11.5% net reveals the company's cost structure and reinvestment intensity. Our analysis indicates that profit quality is adequate though not exceptional, with the quality factor at the 51th percentile.

The margin profile shows gross margins of 26%, operating margins of -10%, net margins of -11.5%. Return metrics include ROE of -33.7% and ROA of -12.4%. Relative to the Manufacturing sector, gross margins are 16.2 percentage points below the sector median of 43%, and ROE of -33.7% compares to a sector median of -2.5%.

The balance sheet reflects high leverage with D/E of 171%, which may limit financial flexibility, a dividend yield of 2.25%, revenue growth of 86%. The sector median D/E is 0%, putting Quanex Building Products CORP at higher leverage than the typical peer. Elevated leverage in combination with the current margin profile warrants close monitoring for any deterioration in debt-servicing capacity.

We assign a High uncertainty rating to Quanex Building Products CORP. Key risk factors include significant leverage (171% debt-to-equity), current negative profitability (net margin -11.5%), the combination of leverage (171% D/E) and thin margins (-11.5% net) amplifies downside risk. The wide range of potential outcomes widens our fair value estimate and increases the possibility of permanent capital impairment. Investors considering this name should size positions accordingly and demand a meaningful margin of safety before initiating.

Specific risk factors that inform our assessment include: significant leverage (171% debt-to-equity); current negative profitability (net margin -11.5%); the combination of leverage (171% D/E) and thin margins (-11.5% net) amplifies downside risk. 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 58th percentile and quality factor at the 51th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: a 2.25% dividend yield anchors total return. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile warrants caution and disciplined position management.

We rate Quanex Building Products CORP's capital allocation as Poor. Key concerns include low returns on equity (-33.7%), elevated leverage (171% D/E), negative profitability, weak asset returns (ROA -12.4%). Exemplary capital allocators generate ROE above 20% and maintain conservative leverage — Quanex Building Products CORP 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, Quanex Building Products CORP receives a Hold rating with a composite score of 50.2/100 (rank #1979 of 7,333). Our quantitative framework assigns a No Moat (34/100, trend: stable), High uncertainty, and Poor capital allocation. The average factor score across quality, value, momentum, stability, and investment is 44/100.

Our analysis supports a neutral stance on Quanex Building Products CORP. While the quantitative profile is not weak enough to warrant selling, it lacks the multi-factor strength required for a buy recommendation. Existing holders should maintain positions and monitor for catalysts — either fundamental improvement or valuation compression — that would shift the risk-reward balance.