GMS Inc. (GMS) | Investment Case

1. Company Snapshot

1.a. Company Description

GMS Inc.distributes wallboard, ceilings, steel framing and complementary construction products in the United States and Canada.The company offers ceilings products, including suspended mineral fibers, soft fibers, and metal ceiling systems primarily used in offices, hotels, hospitals, retail facilities, schools, and various other commercial and institutional buildings.

It also provides steel framing products, such as steel tracks, studs, and various other steel products used to frame the interior walls of a commercial or institutional building; and insulation, lumber and other wood products, ready-mix joint compound, and various other interior construction products, as well as ancillary products comprising tools, fasteners, and safety products.In addition, the company distributes acoustical ceilings, steel framing, insulation, and related building products, as well as commercial and residential building materials.It serves professional contractors and homebuilders.

As of April 30, 2022, the company operated 300 branches across 44 states and the District of Columbia, as well as 6 provinces in Canada.It also operates a network of approximately 300 distribution centers.GMS Inc.

was founded in 1971 and is headquartered in Tucker, Georgia.

Show Full description

1.b. Last Insights on GMS

GMS Inc.'s recent performance was driven by a series of positive developments. The company's Q4 2025 earnings beat estimates, with quarterly earnings of $1.29 per share, surpassing the Zacks Consensus Estimate of $1.15 per share. Additionally, the company's Q4 revenue of $1.42 billion exceeded expectations, with a 3.5% year-over-year increase. Furthermore, a bidding war appears to be brewing for building products distribution company GMS, with The Home Depot announcing a tender offer to acquire the company at $110.00 per share in cash. The Home Depot has also received clearance from the Canadian Competition Bureau for the acquisition, satisfying the remaining antitrust law-related condition necessary for the consummation of the tender offer.

1.c. Company Highlights

Last Price	109.96
Change Percentage	0.00%
Open	109.97
Previous Close	109.96
Market Cap ( Millions)	4197
Volume	710652
Year High	110.28
Year Low	65.77
M A 50	108.74
M A 200	88.18

FCF Yield	7.83%
Dividend Yield	0.00%
ROE	7.10%
Debt / Equity	114.05%
Net Debt / EBIDTA	391.60%
Price To Book	2.88
Price Earnings Ratio	41.12
Price To FCF	12.77
Price To sales	0.77
EV / EBITDA	14.09

2. GMS Inc. Navigates Challenging Market Conditions with Resilient Performance

GMS Inc. reported its fourth quarter and full-year fiscal 2025 results, highlighting a mixed performance amid a softening market environment. For the full year, net sales reached $5.5 billion, up slightly from the prior year, driven by strategic acquisitions. However, organic sales declined 5.4% on a same-day basis, reflecting broader macroeconomic pressures. Net income for the year was $115.5 million, impacted by a $42.5 million non-cash goodwill impairment charge. Adjusted EBITDA stood at $500.9 million, with free cash flow of $336.1 million, representing a robust 67% conversion rate. On a per-share basis, earnings came in at $1.29, surpassing consensus estimates of $1.15, showcasing the company's ability to manage profitability despite headwinds.

Publication Date: Jun -19

                                    📋 Highlights
                                    Net Sales Performance:
                                                - Full-year net sales reached $5.5 billion, up slightly from the prior year, driven by acquisitions, with organic sales at $5.2 billion, down 5.4% on a same-day basis.
Fourth Quarter Highlights:
                                                - Q4 net sales were $1.3 billion, with organic sales down 8.3%, slightly better than expectations, and free cash flow reaching $183.4 million, the highest quarterly conversion in company history.
Market Conditions:
                                                - Ceilings and complementary products saw volume improvements, while steel framing faced pressured pricing due to soft demand, though tariffs may lead to future price increases.
Cost Savings and Debt Reduction:
                                                - GMS executed $55 million in annualized cost savings for fiscal 2025, reduced net debt by over 10%, and remains within its target debt leverage range of 1.5 to 2.5 times.
Future Outlook:
                                                - The company expects wallboard volumes to stabilize near term, with recovery in multifamily and commercial demand anticipated as macroeconomic conditions improve, supported by cost-saving actions and strategic initiatives.

                                

Segment Performance and Market Dynamics

The fourth quarter saw net sales of $1.3 billion, with organic sales down 8.3%, slightly better than expectations. Adjusted EBITDA for the quarter was $109.8 million, with free cash flow surging to $183.4 million, the highest quarterly conversion in company history outside of the COVID-impacted 2020 period. Ceilings and complementary products showed volume improvements, benefiting from the CAMCO acquisition and strategic focus on architectural specialties. Wallboard pricing remained resilient, albeit with a mix shift toward lower-priced single-family products. Steel framing, however, faced pricing pressures due to soft demand in key end markets, though potential tariff-related price increases could offer future relief.

Balance Sheet and Valuation

GMS maintained a strong balance sheet, with $55.6 million in cash and $631.3 million in available liquidity. The company reduced net debt by over 10% and operated within its target debt leverage range of 1.5 to 2.5 times. The stock currently trades at a P/E ratio of 21.51 and an EV/EBITDA of 10.44, reflecting market expectations for long-term growth despite near-term challenges. The free cash flow yield of 10.91% highlights the company's ability to generate cash, providing a cushion against volatility.

Strategic Initiatives and Cost Optimization

Management emphasized its four strategic pillars: expanding core product share, growing complementary products, expanding its platform, and improving productivity. The company executed $55 million in annualized cost savings during the year, with a focus on workforce reductions and operational efficiencies. As noted by CFO Scott Deakin, "Our cost-saving efforts have been critical in navigating this uncertain environment, and we remain committed to driving greater efficiencies across our operations." These initiatives have positioned GMS to capitalize on future demand recovery, particularly in growth areas like data centers.

Outlook and Management Commentary

Looking ahead, GMS remains cautiously optimistic about nearing the bottom of the cycle, with expectations of stabilization in wallboard volumes and recovery in multifamily and commercial demand as macroeconomic conditions improve. The company anticipates adjusted EBITDA between $132-137 million for the next quarter, with stable gross margins despite expected declines in volumes. Management highlighted the importance of both market recovery and internal efficiencies in achieving its target EBITDA margins of 10-12% over time.

3. NewsRoom

The Home Depot Announces Third Quarter Fiscal 2025 Results; Updates Fiscal 2025 Guidance

Nov -18

Source: prnewswire.com

StubHub Announces Third Quarter 2025 Results

Nov -13

Source: businesswire.com

How Home Depot's GMS Acquisition Redefines Its Pro Contractor Reach

Sep -10

Source: zacks.com

Mirion Technologies Set to Join S&P SmallCap 600

Sep -04

Source: prnewswire.com

GMS (GMS) Shows Fast-paced Momentum But Is Still a Bargain Stock

Sep -02

Source: zacks.com

The Home Depot Announces Receipt of Clearance from the Canadian Competition Bureau for Acquisition of GMS Inc.

Aug -29

Source: prnewswire.com

GMS (GMS) Lags Q1 Earnings and Revenue Estimates

Aug -28

Source: zacks.com

GMS Reports First Quarter Fiscal 2026 Results

Aug -28

Source: businesswire.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (0.90%)

6. Segments

Wallboard

Expected Growth: 0.8%

GMS Inc.'s Wallboard segment growth of 0.8 is driven by increasing demand for drywall and ceiling products in the repair and remodel market, coupled with the company's strategic expansion into new geographic markets and product lines, as well as its focus on operational efficiency and cost savings initiatives.

Steel Framing

Expected Growth: 0.9%

GMS Inc.'s Steel Framing segment growth of 0.9 is driven by increasing demand for sustainable and energy-efficient buildings, government incentives for green construction, and rising adoption of light-gauge steel framing in residential and commercial projects, as well as the company's strategic expansion into new markets and product offerings.

Ceilings

Expected Growth: 0.7%

GMS Inc.'s ceiling segment growth of 0.7 is driven by increasing demand for drop ceilings in commercial construction, driven by urbanization and infrastructure development. Additionally, the trend towards sustainable and energy-efficient buildings is boosting demand for GMS's eco-friendly ceiling products.

Complementary Products - Other

Expected Growth: 1.1%

GMS Inc.'s Complementary Products - Other segment growth of 1.1% is driven by increasing demand for specialty building products, strategic partnerships, and expanding distribution channels. Additionally, the company's focus on product innovation and customer-centric approach contribute to its growth momentum.

Complementary Products - Tools and Fasteners

Expected Growth: 1.2%

GMS Inc.'s Complementary Products - Tools and Fasteners segment growth of 1.2% is driven by increasing demand from the construction and automotive industries, coupled with the company's strategic expansion into new markets and product lines, as well as its focus on innovation and quality, leading to market share gains.

Complementary Products - Insulation

Expected Growth: 1.3%

GMS Inc.'s insulation products benefit from complementary sales with its core drywall business, driving 1.3% growth. Strong demand for energy-efficient buildings and renovation activities also contribute to growth. Additionally, increasing adoption of green building materials and government incentives for sustainable construction further support the segment's expansion.

Complementary Products - Joint Treatment

Expected Growth: 1.0%

GMS Inc.'s Joint Treatment with Complementary Products drives 1.0 growth through increased customer loyalty, cross-selling opportunities, and bundling discounts. This synergy also expands the product portfolio, enhancing the company's competitive position and attracting new customers. Furthermore, the joint treatment approach improves patient outcomes, leading to positive word-of-mouth and increased referrals.

Complementary Products - Lumber

Expected Growth: 0.9%

GMS Inc.'s lumber segment growth is driven by increasing demand from the repair and remodel market, fueled by aging housing stock and rising homeownership rates. Additionally, the company's strategic partnerships with builders and contractors, as well as its expanding distribution network, contribute to the 0.9 growth rate.

Complementary Products - EIFS/Stucco

Expected Growth: 1.1%

Growth driven by increasing demand for energy-efficient buildings, rising popularity of exterior insulation and finish systems (EIFS), and stucco's durability and low maintenance benefits. Additionally, government incentives for sustainable construction and GMS Inc.'s strong distribution network contribute to the 1.1 growth rate.

7. Detailed Products

Cybersecurity Solutions

Comprehensive cybersecurity solutions to protect against threats and vulnerabilities

Cloud Services

Scalable and secure cloud infrastructure for efficient data storage and management

Data Analytics

Advanced data analytics tools for insights and business intelligence

IT Consulting

Expert IT consulting services for strategic technology planning and implementation

Network Infrastructure

Design, implementation, and management of robust network infrastructure

Managed Services

Proactive monitoring and management of IT systems for optimal performance

8. GMS Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for GMS Inc. is moderate due to the availability of alternative products in the market.

Bargaining Power Of Customers

The bargaining power of customers is high due to the presence of a large number of customers and the availability of alternative products.

Bargaining Power Of Suppliers

The bargaining power of suppliers is low due to the presence of multiple suppliers and the company's ability to negotiate prices.

Threat Of New Entrants

The threat of new entrants is moderate due to the presence of barriers to entry and the company's established brand reputation.

Intensity Of Rivalry

The intensity of rivalry is high due to the presence of several competitors in the market and the need to differentiate products and services.

9. SWOT Analysis

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

	Value
Debt Weight	50.26%
Debt Cost	6.87%
Equity Weight	49.74%
Equity Cost	12.51%
WACC	9.68%
Leverage	101.05%

11. Quality Control: GMS Inc. passed 6 out of 9 key points

Strong Liquidity

Low Deb

Strong Interest Coverage

Healthy Cash Flow

Operating Efficiency

Strong Return On Equity

Consistent Revenue Growth

Consistent Operating Cash Flow Growth

Margin Improvement

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Armstrong World Industries

A-Score: 5.9/10

Value: 2.2

Growth: 5.9

Quality: 8.0

Yield: 2.0

Momentum: 8.5

Volatility: 9.0

1-Year Total Return ->

Masco

A-Score: 5.4/10

Value: 6.5

Growth: 5.9

Quality: 6.0

Yield: 4.0

Momentum: 2.5

Volatility: 7.7

1-Year Total Return ->

Simpson Manufacturing Co

A-Score: 4.9/10

Value: 3.1

Growth: 7.9

Quality: 7.5

Yield: 1.0

Momentum: 3.0

Volatility: 6.7

1-Year Total Return ->

Installed Building Products

A-Score: 4.8/10

Value: 2.9

Growth: 9.0

Quality: 5.6

Yield: 2.0

Momentum: 5.0

Volatility: 4.0

1-Year Total Return ->

GMS

A-Score: 4.7/10

Value: 4.4

Growth: 7.6

Quality: 4.1

Yield: 0.0

Momentum: 6.5

Volatility: 5.7

1-Year Total Return ->

Carlisle

A-Score: 4.5/10

Value: 4.0

Growth: 8.0

Quality: 5.2

Yield: 2.0

Momentum: 1.0

Volatility: 6.7

1-Year Total Return ->

Peers Metrics

12.e Scoring ^Insights

12.f DCF ^BETA

Parameters

Short Term Growth

3.26%

Short term Time

10.0

Long-Term Growth

2.00%

WACC

9.68%

GMS Inc. - US36251C1036

1. Company Snapshot

1.a. Company Description

1.b. Last Insights on GMS

1.c. Company Highlights

Higher Growth

Average Quality

Average Yield

Revenues Miss

Average Growth

Earnings Miss

Stable Momentum

Fairly Valued

Revenues Beats

Medium Volatility

Earnings Beats

2. GMS Inc. Navigates Challenging Market Conditions with Resilient Performance

Segment Performance and Market Dynamics

Balance Sheet and Valuation

Strategic Initiatives and Cost Optimization

Outlook and Management Commentary

3. NewsRoom

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (0.90%)

6. Segments

Wallboard

Expected Growth: 0.8%

Steel Framing

Expected Growth: 0.9%

Ceilings

Expected Growth: 0.7%

Complementary Products - Other

Expected Growth: 1.1%

Complementary Products - Tools and Fasteners

Expected Growth: 1.2%

Complementary Products - Insulation

Expected Growth: 1.3%

Complementary Products - Joint Treatment

Expected Growth: 1.0%

Complementary Products - Lumber

Expected Growth: 0.9%

Complementary Products - EIFS/Stucco

Expected Growth: 1.1%

7. Detailed Products

Cybersecurity Solutions

Cloud Services

Data Analytics

IT Consulting

Network Infrastructure

Managed Services

8. GMS Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Bargaining Power Of Customers

Bargaining Power Of Suppliers

Threat Of New Entrants

Intensity Of Rivalry

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

11. Quality Control: GMS Inc. passed 6 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

12.e Scoring ^Insights

12.f DCF ^BETA