Could MasterBrand shares be a bargain under $15?

MasterBrand shares have been climbing steadily over the last year since spinning off. But are they still a bargain under $15?

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MasterBrand (NYSE:MBC) is a leading manufacturer and marketer of home furnishings, cabinetry, and countertops in the US. I have been a shareholder for a while now, but are MasterBrand shares still a bargain under $15?

What’s the story?

MasterBrand has a strong brand portfolio, including MasterBrand Cabinetry, Merillat Cabinets, and Wilsonart Laminates. MasterBrand also has a broad distribution network, with over 1,000 retail locations across the country.

In recent years, MasterBrand has faced some challenges, including supply chain disruptions, rising costs, and uncertain demand. However, the company has taken steps to address these challenges, and now appears well positioned for growth.

One of the biggest challenges that MasterBrand faced in recent years was the COVID-19 pandemic. The pandemic caused widespread disruptions to the supply chain, which made it difficult to get the materials it needed to produce its products. This led to higher costs and longer lead times for customers.

MasterBrand also faced rising costs in other areas, such as labour and energy. These cost increases put pressure on the company’s margins.

The company has taken steps to address these challenges, such as investing in its supply chain to improve its resilience. It has also taken steps to reduce costs, such as negotiating better prices with suppliers.

MasterBrand is also benefiting from the recovery of the housing market. The company expect the housing market to grow in the coming years, increasing demand for products. In 2023 to date, MasterBrand shares have steadily climbed by68%.

Why would I be interested?

  • Track record — the company has a long history of success. It was founded in 1947 and has been growing steadily ever since.
  • Brand recognition — MasterBrand’s strong portfolio of brands are well-known and trusted by consumers.
  • Robust network — the company has a broad distribution network, with over 1,000 retail locations. MasterBrand products are sold through a variety of channels, including retail stores, home centres, and online retailers.
  • Innovation — MasterBrand is constantly developing new products and technologies to meet the needs of its customers.
  • Sustainability — the company is working to reduce its environmental impact.
  • Undervalued — the shares are trading at a significant discount to fair value. A discounted cash flow calculation suggests that the current price of $12.88 is an incredible 84% below fair value of $79.37.
  • Dividend — the company has a healthy dividend yield of 5.4%. It also has a strong balance sheet and a manageable debt load, allowing this to increase in the future.

What are the risks?

There is a risk that the housing market could slow down as interest rate increases gradually impact the economy. This would hurt demand for the company’s products. One-off expenditures from its recent spin off from Fortune Brands could also make analysis of MasterBrand shares difficult.

Am I buying?

Overall, MasterBrand is a well-managed company with a strong track record of success. The company is well-positioned for growth in the coming years, and it offers a number of attractive investment features. I believe that MasterBrand is a good investment for investors who are looking for a high-quality company with a dividend yield and growth potential. I am buying MasterBrand shares at this price, and will continue to do so as the company executes its long-term strategy.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Gordon Best has positions in MasterBrand. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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