January 22, 2017 NYSE: TREX

TREX CO INC BUY A+

A

A-

HOLD

B+

B

Annual Dividend Rate NA

B-

C+

C

Annual Dividend Yield NA

SELL C-

STOCK PERFORMANCE (%) 3 Mo. Price Change 15.46

D

Beta 2.30

Sector: Industrials TREX BUSINESS DESCRIPTION Trex Company, Inc. manufactures and distributes wood/plastic composite products, and related accessories primarily for the residential and commercial decking, and railing applications in the United States.

D+

D-

E+

E

E-

Market Capitalization $2.0 Billion Sub-Industry: Building Products

Weekly Price: (US$)

SMA (50)

F

BUY 52-Week Range $31.11-$72.21

RATING SINCE TARGET PRICE

02/26/2016 $88.90

Price as of 1/19/2017 $67.73

Source: S&P

SMA (100)

1 Year

2 Years 90

TARGET TARGET TARGETPRICE PRICE$88.90 $88.90 PRICE $88.90 TARGET

80 70 60

1 Yr. 110.34

3 Yr (Ann) 24.62

Last Qtr 12.91 84.21 91.66

12 Mo. 11.20 36.53 46.09

3 Yr CAGR 13.17 57.19 67.29

RETURN ON EQUITY (%) TREX Q3 2016 51.16 Q3 2015 41.81 Q3 2014 48.05

Ind Avg 199.03 106.12 17.22

S&P 500 12.00 12.28 14.59

50

GROWTH (%)

40

Revenues Net Income EPS

30 Rating History

BUY

BUY

Volume in Millions

10 5

2015

0 2017

2016

COMPUSTAT for Price and Volume, TheStreet Ratings, Inc. for Rating History

P/E COMPARISON RECOMMENDATION We rate TREX CO INC (TREX) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, impressive record of earnings per share growth, compelling growth in net income and good cash flow from operations. We feel its strengths outweigh the fact that the company shows low profit margins. 32.88

23.98

25.41

TREX

Ind Avg

S&P 500

HIGHLIGHTS TREX's revenue growth has slightly outpaced the industry average of 3.9%. Since the same quarter one year prior, revenues rose by 12.9%. Growth in the company's revenue appears to have helped boost the earnings per share.

EPS ANALYSIS¹ ($)

2014

Q2 0.79

Q3 0.23

2015

Q1 0.78

Q4 0.26

Q3 0.12

Q2 0.58

Q1 0.55

Q4 0.16

Q3 0.28

Q2 0.46

Q1 0.37

TREX has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.41, which illustrates the ability to avoid short-term cash problems. TREX CO INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. During the past fiscal year, TREX CO INC increased its bottom line by earning $1.51 versus $1.27 in the prior year. This year, the market expects an improvement in earnings ($2.44 versus $1.51).

2016

NA = not available NM = not meaningful 1 Compustat fiscal year convention is used for all fundamental data items.

The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Building Products industry. The net income increased by 84.2% when compared to the same quarter one year prior, rising from $3.74 million to $6.90 million. Net operating cash flow has significantly increased by 65.40% to $66.25 million when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 30.34%.

This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2016. All rights reserved.

Report Date: January 22, 2017

PAGE 1

January 22, 2017 NYSE: TREX

TREX CO INC Sector: Industrials Building Products Source: S&P Annual Dividend Rate NA

Annual Dividend Yield NA

PEER GROUP ANALYSIS

14%

AAON FA RA VO

TREX ROCK APOG

BL E

SSD

DOOR UFPI

52-Week Range $31.11-$72.21

Price as of 1/19/2017 $67.73

The building products industry includes firms that manufacture and install products for the residential construction and automotive markets. The industry is cyclical in nature, driven by the overall health of the US economy. The level of new construction, renovation and re-sales of houses, interest rate environment, labor costs and the cost of raw materials are predominant factors influencing growth. The US real estate market witnessed dramatic expansion, which translated into radical growth for the building products industry. The strength of the residential market led to a robust M&A environment. However, since the market collapsed, building activity slowed and the industry has been in turmoil. Nevertheless, worldwide demand for building products is still strong, led by growth in emerging economies.

ALLE

OC

Existing home sales in the US plummeted as the sub-prime mortgage crisis dragged down the value and demand for housing. After rising for many years, prices of existing houses have witnessed a sharp decline since the beginning of 2007 and a bottoming in 2010. The combination of a slowly improving economy and tight credit has resulted in existing home sales continuing to languish at a slow pace. These factors significantly influence building products demand.

UN FA B RA VO

AWI

LE

-2%

Market Capitalization $2.0 Billion

INDUSTRY ANALYSIS

REVENUE GROWTH AND EBITDA MARGIN*

Revenue Growth (TTM)

Beta 2.30

6%

26%

EBITDA Margin (TTM) Companies with higher EBITDA margins and revenue growth rates are outperforming companies with lower EBITDA margins and revenue growth rates. Companies for this scatter plot have a market capitalization between $1.3 Billion and $6.4 Billion. Companies with NA or NM values do not appear. *EBITDA – Earnings Before Interest, Taxes, Depreciation and Amortization.

New home starts and permits also slowed considerably during the real estate recession but may have bottomed as median home prices start to rebound. Excess office and retail space weaken demand for new non-residential construction. International demand for building products remains steady, enabling companies with exposure to foreign markets to withstand the effects of the weak US housing market. Building products sub-sectors face challenges from high shipping costs and timely delivery of products. However, volatility in the housing market, decreased consumer spending and looming uncertainty in the US economy are bound to effect spending in the home improvement and auto markets in the foreseeable future. Any rise in the cost of raw materials, driven by higher energy prices or labor costs, would likely hurt profit margins.

REVENUE GROWTH AND EARNINGS YIELD 14%

PEER GROUP: Building Products

E

FA B RA VO

AWI

USG

LE

-2%

BL

OC

UN

Revenue Growth (TTM)

RA VO

ALLE

FA

AAON TREX APOG ROCK SSD DOOR UFPI

0%

25%

Earnings Yield (TTM)

Ticker TREX ALLE OC USG AWI SSD UFPI DOOR AAON APOG ROCK

Recent Company Name Price ($) TREX CO INC 67.73 ALLEGION PLC 66.58 OWENS CORNING 53.86 USG CORP 28.58 ARMSTRONG WORLD INDUSTRIES 39.70 SIMPSON MANUFACTURING INC 42.88 UNIVERSAL FOREST PRODS INC 97.84 MASONITE INTERNATIONAL CORP 65.65 AAON INC 32.25 APOGEE ENTERPRISES INC 56.67 GIBRALTAR INDUSTRIES INC 42.10

Market Cap ($M) 1,991 6,385 6,104 4,175 2,191 2,039 1,989 1,969 1,701 1,623 1,327

Price/ Earnings 32.88 28.45 15.09 4.23 41.79 23.82 20.05 29.31 31.62 19.88 32.38

Net Sales TTM ($M) 473.50 2,213.70 5,591.00 3,208.00 1,514.00 845.23 3,034.51 1,978.36 389.54 1,062.56 1,058.24

Net Income TTM ($M) 61.66 226.20 416.00 1,015.00 63.80 87.07 99.33 69.97 54.90 82.61 41.65

The peer group comparison is based on Major Building Products companies of comparable size.

Companies that exhibit both a high earnings yield and high revenue growth are generally more attractive than companies with low revenue growth and low earnings yield. Companies for this scatter plot have revenue growth rates between -0.5% and 12.5%. Companies with NA or NM values do not appear.

This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2016. All rights reserved.

Report Date: January 22, 2017

PAGE 2

January 22, 2017 NYSE: TREX

TREX CO INC Sector: Industrials Building Products Source: S&P Annual Dividend Rate NA

Annual Dividend Yield NA

COMPANY DESCRIPTION Trex Company, Inc. manufactures and distributes wood/plastic composite products, and related accessories primarily for the residential and commercial decking, and railing applications in the United States. It offers Trex Transcend, Trex Enhance, and Trex Select protective shells for protection against fading, staining, and scratching; and Trex Hideaway, a hidden fastening system for grooved boards. The company also provides railing products, such as Trex Transcend Railing for use with Trex decking products and other decking materials; Trex Select Railing for consumers, who desire a simple clean finished look for their decks; and Trex Reveal aluminum railing for contemporary aesthetic look. In addition, it offers Trex Transcend Porch Flooring and Railing System, an integrated system of porch components and accessories; Trex Seclusions fencing product, which includes structural posts, bottom and top rails, pickets, and decorative post caps; and TrexTrim, a cellular PVC residential exterior trim product. Further, the company provides steel deck framing systems under the Trex Elevations name; and Trex DeckLighting, a line of energy-efficient LED dimmable deck lighting for use on posts, floors, and steps. Additionally, it acts as a licensor in various licensing agreements with third parties to manufacture and sell products under Trex name, including Trex Outdoor Furniture; Trex RainEscape, an above joist deck drainage system; Trex CustomCurve, an on-site system that allows contractors to heat and bend Trex products; Trex Pergolas, a cellular PVC trim product; Diablo Trex Blade, a saw blade for wood-plastic composite decking; and Trex SpiralStairs and structural steel posts. The company sells its products through wholesale distributors, retail lumber dealers, and Home Depot and Lowe's stores. Trex Company, Inc. was founded in 1996 and is headquartered in Winchester, Virginia. TREX CO INC 160 Exeter Drive Winchester, VA 22603 USA Phone: 540-542-6300 http://www.trex.com

Beta 2.30

Market Capitalization $2.0 Billion

52-Week Range $31.11-$72.21

Price as of 1/19/2017 $67.73

STOCK-AT-A-GLANCE Below is a summary of the major fundamental and technical factors we consider when determining our overall recommendation of TREX shares. It is provided in order to give you a deeper understanding of our rating methodology as well as to paint a more complete picture of a stock's strengths and weaknesses. It is important to note, however, that these factors only tell part of the story. To gain an even more comprehensive understanding of our stance on the stock, these factors must be assessed in combination with the stock’s valuation. Please refer to our Valuation section on page 5 for further information. FACTOR

SCORE

4.5

Growth out of 5 stars weak Measures the growth of both the company's income statement and cash flow. On this factor, TREX has a growth score better than 80% of the stocks we rate.

strong

4.5

Total Return out of 5 stars weak Measures the historical price movement of the stock. The stock performance of this company has beaten 80% of the companies we cover.

strong

5.0

Efficiency out of 5 stars weak Measures the strength and historic growth of a company's return on invested capital. The company has generated more income per dollar of capital than 90% of the companies we review.

strong

3.5

Price volatility out of 5 stars weak Measures the volatility of the company's stock price historically. The stock is less volatile than 60% of the stocks we monitor.

strong

4.0

Solvency out of 5 stars weak Measures the solvency of the company based on several ratios. The company is more solvent than 70% of the companies we analyze.

strong

0.5

Income out of 5 stars weak Measures dividend yield and payouts to shareholders. This company pays no dividends.

strong

THESTREET RATINGS RESEARCH METHODOLOGY TheStreet Ratings' stock model projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Our Buy, Hold or Sell ratings designate how we expect these stocks to perform against a general benchmark of the equities market and interest rates. While our model is quantitative, it utilizes both subjective and objective elements. For instance, subjective elements include expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings. Objective elements include volatility of past operating revenues, financial strength, and company cash flows. Our model gauges the relationship between risk and reward in several ways, including: the pricing drawdown as compared to potential profit volatility, i.e.how much one is willing to risk in order to earn profits; the level of acceptable volatility for highly performing stocks; the current valuation as compared to projected earnings growth; and the financial strength of the underlying company as compared to its stock's valuation as compared to projected earnings growth; and the financial strength of the underlying company as compared to its stock's performance. These and many more derived observations are then combined, ranked, weighted, and scenario-tested to create a more complete analysis. The result is a systematic and disciplined method of selecting stocks.

This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2016. All rights reserved.

Report Date: January 22, 2017

PAGE 3

January 22, 2017 NYSE: TREX

TREX CO INC Sector: Industrials Building Products Source: S&P Annual Dividend Rate NA

Annual Dividend Yield NA

Consensus EPS Estimates² ($) IBES consensus estimates are provided by Thomson Financial

0.42 Q4 FY16

2.44 E

2.76 E

2016(E)

2017(E)

Market Capitalization $2.0 Billion

52-Week Range $31.11-$72.21

Price as of 1/19/2017 $67.73

FINANCIAL ANALYSIS TREX CO INC's gross profit margin for the third quarter of its fiscal year 2016 has increased when compared to the same period a year ago. The company managed to grow both sales and net income at a faster pace than the average competitor in its industry this quarter as compared to the same quarter a year ago. TREX CO INC has average liquidity. Currently, the Quick Ratio is 1.41 which shows that technically this company has the ability to cover short-term cash needs. The company's liquidity has increased from the same period last year, indicating improving cash flow. During the same period, stockholders' equity ("net worth") has increased by 11.59% from the same quarter last year. Together, the key liquidity measurements indicate that it is relatively unlikely that the company will face financial difficulties in the near future. STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. To learn more visit www.TheStreetRatings.com.

INCOME STATEMENT Net Sales ($mil) EBITDA ($mil) EBIT ($mil) Net Income ($mil)

Beta 2.30

Q3 FY16 106.17 14.04 10.57 6.90

Q3 FY15 94.02 10.04 6.44 3.74

Q3 FY16 22.94 210.65 0.00 120.52

Q3 FY15 2.53 232.63 48.50 108.00

Q3 FY16 31.48% 13.22% 9.95% 2.25 29.27% 51.16%

Q3 FY15 27.38% 10.68% 6.85% 1.83 19.41% 41.81%

Q3 FY16 2.03 0.00 0.08 135.46

Q3 FY15 1.29 0.31 0.16 41.04

Q3 FY16 29 0.00 0.23 4.10 NA 290,838

Q3 FY15 31 0.00 0.12 3.50 NA 246,857

BALANCE SHEET Cash & Equiv. ($mil) Total Assets ($mil) Total Debt ($mil) Equity ($mil) PROFITABILITY Gross Profit Margin EBITDA Margin Operating Margin Sales Turnover Return on Assets Return on Equity DEBT Current Ratio Debt/Capital Interest Expense Interest Coverage SHARE DATA Shares outstanding (mil) Div / share EPS Book value / share Institutional Own % Avg Daily Volume

2 Sum of quarterly figures may not match annual estimates due to use of median consensus estimates.

This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2016. All rights reserved.

Report Date: January 22, 2017

PAGE 4

January 22, 2017 NYSE: TREX

TREX CO INC Sector: Industrials Building Products Source: S&P Annual Dividend Rate NA

Annual Dividend Yield NA

RATINGS HISTORY Our rating for TREX CO INC has not changed since 2/26/2016. As of 1/19/2017, the stock was trading at a price of $67.73 which is 6.2% below its 52-week high of $72.21 and 117.7% above its 52-week low of $31.11.

2015

Market Capitalization $2.0 Billion

Price/Earnings

1

2

3

premium

$50

2016

To Buy Hold Buy

Price reflects the closing price as of the date listed, if available

(as of 1/19/2017)

41.56% Buy - We believe that this stock has the opportunity to appreciate and produce a total return of more than 10% over the next 12 months. 30.68% Hold - We do not believe this stock offers conclusive evidence to warrant the purchase or sale of shares at this time and that its likelihood of positive total return is roughly in balance with the risk of loss. 27.77% Sell - We believe that this stock is likely to decline by more than 10% over the next 12 months, with the risk involved too great to compensate for any possible returns.

TheStreet Ratings 14 Wall Street, 15th Floor New York, NY 10005 www.thestreet.com Research Contact: 212-321-5381 Sales Contact: 866-321-8726

5

1

2

3

4

1

2

3

premium

5

4

5

1

2

premium

3

4

5

3

4

5

discount

TREX 15.33 Peers 18.22 • Discount. The P/CF ratio, a stock’s price divided by the company's cash flow from operations, is useful for comparing companies with different capital requirements or financing structures. • TREX is trading at a discount to its peers. Price to Earnings/Growth

1

2

3

premium

4

5

discount

TREX 0.54 Peers 1.49 • Discount. The PEG ratio is the stock’s P/E divided by the consensus estimate of long-term earnings growth. Faster growth can justify higher price multiples. • TREX trades at a significant discount to its peers. Earnings Growth

1

2

3

4

lower

5 higher

TREX 46.09 Peers 34.03 • Higher. Elevated earnings growth rates can lead to capital appreciation and justify higher price-to-earnings ratios. • TREX is expected to have an earnings growth rate that significantly exceeds its peers. Sales Growth

discount

TREX 4.20 Peers 1.54 • Premium. In the absence of P/E and P/B multiples, the price-to-sales ratio can display the value investors are placing on each dollar of sales. • TREX is trading at a significant premium to its industry.

2

premium

discount

TREX 16.52 Peers 22.10 • Discount. A lower price-to-book ratio makes a stock more attractive to investors seeking stocks with lower market values per dollar of equity on the balance sheet. • TREX is trading at a significant discount to its peers. Price/Sales

1

Price/CashFlow

discount

TREX 24.54 Peers 19.13 • Premium. A higher price-to-projected earnings ratio than its peers can signify a more expensive stock or higher future growth expectations. • TREX is trading at a significant premium to its peers. Price/Book

RATINGS DEFINITIONS & DISTRIBUTION OF THESTREET RATINGS

Price as of 1/19/2017 $67.73

discount

premium

From Hold Buy Buy

4

TREX 32.88 Peers 23.98 • Premium. A higher P/E ratio than its peers can signify a more expensive stock or higher growth expectations. • TREX is trading at a significant premium to its peers. Price/Projected Earnings

MOST RECENT RATINGS CHANGES Date Price Action 2/26/16 $42.95 Upgrade 1/13/16 $33.29 Downgrade 1/16/15 $39.68 No Change

52-Week Range $31.11-$72.21

VALUATION BUY. TREX CO INC's P/E ratio indicates a premium compared to an average of 23.98 for the Building Products industry and a premium compared to the S&P 500 average of 25.41. To use another comparison, its price-to-book ratio of 16.52 indicates a significant premium versus the S&P 500 average of 2.83 and a significant discount versus the industry average of 22.10. The price-to-sales ratio is well above both the S&P 500 average and the industry average, indicating a premium. The valuation analysis reveals that, TREX CO INC seems to be trading at a premium to investment alternatives within the industry.

$75

HOLD: $33.29 BUY: $42.95

BUY: $39.68

2 Year Chart

Beta 2.30

1

2

3

lower

4

5 higher

TREX 11.20 Peers 7.94 • Higher. A sales growth rate that exceeds the industry implies that a company is gaining market share. • TREX has a sales growth rate that significantly exceeds its peers.

DISCLAIMER: The opinions and information contained herein have been obtained or derived from sources believed to be reliable, but TheStreet Ratings cannot guarantee its accuracy and completeness, and that of the opinions based thereon. Data is provided via the COMPUSTAT® Xpressfeed product from Standard &Poor's, a division of The McGraw-Hill Companies, Inc., as well as other third-party data providers. TheStreet Ratings is a division of TheStreet, Inc., which is a publisher. This research report contains opinions and is provided for informational purposes only. You should not rely solely upon the research herein for purposes of transacting securities or other investments, and you are encouraged to conduct your own research and due diligence, and to seek the advice of a qualified securities professional, before you make any investment. None of the information contained in this report constitutes, or is intended to constitute a recommendation by TheStreet Ratings of any particular security or trading strategy or a determination by TheStreet Ratings that any security or trading strategy is suitable for any specific person. To the extent any of the information contained herein may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person. Your use of this report is governed by TheStreet, Inc.'s Terms of Use found at http://www.thestreet.com/static/about/terms-of-use.html.

This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2016. All rights reserved.

Report Date: January 22, 2017

PAGE 5