07-07-2025
3 Reasons OC is Risky and 1 Stock to Buy Instead
Over the past six months, Owens Corning's shares (currently trading at $145.26) have posted a disappointing 13.9% loss, well below the S&P 500's 6.2% gain. This was partly due to its softer quarterly results and may have investors wondering how to approach the situation.
Is there a buying opportunity in Owens Corning, or does it present a risk to your portfolio? See what our analysts have to say in our full research report, it's free.
Even though the stock has become cheaper, we're swiping left on Owens Corning for now. Here are three reasons why you should be careful with OC and a stock we'd rather own.
Investors interested in Home Construction Materials companies should track organic revenue in addition to reported revenue. This metric gives visibility into Owens Corning's core business because it excludes one-time events such as mergers, acquisitions, and divestitures along with foreign currency fluctuations - non-fundamental factors that can manipulate the income statement.
Over the last two years, Owens Corning's organic revenue averaged 4.4% year-on-year declines. This performance was underwhelming and implies it may need to improve its products, pricing, or go-to-market strategy. It also suggests Owens Corning might have to lean into acquisitions to grow, which isn't ideal because M&A can be expensive and risky (integrations often disrupt focus).
Forecasted revenues by Wall Street analysts signal a company's potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.
Over the next 12 months, sell-side analysts expect Owens Corning's revenue to drop by 6.7%, a decrease from its 9.6% annualized growth for the past five years. This projection is underwhelming and indicates its products and services will see some demand headwinds.
If you've followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can't use accounting profits to pay the bills.
As you can see below, Owens Corning's margin dropped by 4.8 percentage points over the last five years. Continued declines could signal it is in the middle of an investment cycle. Owens Corning's free cash flow margin for the trailing 12 months was 10%.
Owens Corning's business quality ultimately falls short of our standards. Following the recent decline, the stock trades at 9.8× forward P/E (or $145.26 per share). While this valuation is optically cheap, the potential downside is big given its shaky fundamentals. We're pretty confident there are superior stocks to buy right now. We'd suggest looking at one of our top digital advertising picks.
Donald Trump's victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.
While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today.
