Small-cap building products play with Tyman integration tailwind. Q3 FY26 delivered a 276% EPS beat and a 21% share rally, yet 9-month adj. EBITDA is DOWN 16% YoY on housing weakness. Balance sheet at 2.8x leverage still elevated. Fair value $26.5 vs $19.74 implies +34% upside, with active class action lawsuit as material overhang.
EV/EBITDA multiple approach on FY26E adjusted EBITDA. Multiple derived from Home Construction Materials peer median ex-outliers (ROCK 12.6x, SSD 11.8x, ex-JELD 40x distressed) with -20% risk adjustment for leverage and litigation overhang → 8.5x nominal. Implicit multiple 8.35x within ±2% of nominal. Cross-check via FCF yield method within +8%. Sensitivity: ±1x multiple = ±$4.60/sh. Base case sits within +3% of Wall Street consensus ($27.25). ⚠️ Not investment advice.
| Component | Assumption | USD/share |
|---|---|---|
| Core business EV | $210M FY26E adj. EBITDA × 8.5x = $1,785M EV / 45.4M shares | +39.32 |
| Net debt | Total debt $672M − est. cash $122M ($363M liquidity − $241M revolver capacity) = $550M / 45.4M shares | −12.11 |
| Buyback authorization | $28.7M remaining / 45.4M shares = accretion optionality if executed near current price | +0.63 |
| Tyman synergy uplift | 50% probability × $30M run-rate synergies × 8.5x = $127.5M / 45.4M shares | +2.81 |
| Litigation reserve | Estimated $180M downside cost (50% prob × $60M settlement + Tyman remediation capex $150M) / 45.4M | −4.17 |
| FV base case | Sum: 39.32 − 12.11 + 0.63 + 2.81 − 4.17 = 26.48 | ≈ $26.48 |
Insider transactions last 12 months: routine Form 4 filings for compensation vesting, no material insider selling >$500K flagged in recent filings. CEO George Wilson still at helm; leadership continuity through Tyman integration. No CFO turnover.
| Item | FY2022 | FY2023 | FY2024 | FY2025 | Guidance FY2026E |
|---|---|---|---|---|---|
| Revenue ($M) | 1,222 | 1,131 | 1,278 | 1,838 | ~1,860 |
| Revenue growth % | +13.9% | −7.4% | +13.0% | +43.8%* | +1.2% |
| Adj. EBITDA ($M) | 170 | 163 | 175 | 237 | ~210 |
| Adj. EBITDA margin % | 13.9% | 14.4% | 13.7% | 12.9% | ~11.3% |
| Net income ($M) | 115 | 90 | −167 | ~35 | ~90 |
| Net debt ($M) | −26 (cash) | −69 (cash) | 670 | 620 | ~550 |
| Metric | Q3 FY25 | Q4 FY25 | Q1 FY26 | Q2 FY26 | Q3 FY26 |
|---|---|---|---|---|---|
| Revenue ($M) | 495.3 | 492.1 | 452.7 | 420.5 | 501.8 |
| Gross margin % | 27.9% | 26.4% | 24.8% | 25.3% | 28.2% |
| Adj. EBITDA ($M) | 70.3 | 67.5 | 39.1 | 32.5 | 72.7 |
| Adj. EPS ($) | 0.69 | 0.65 | 0.15 | 0.10 | 0.79 |
| End-of-period cash ($M) | 90 | 105 | 95 | 108 | 122 |
Business model — Building products for windows, doors and cabinets
Hardware Solutions ~$890M FY26E (~47% rev) 🟡 to prove Tyman legacy + Amesbury Truth. Door hardware, window screens, screwless-frame systems. Q3 sales −2.7% YoY, EBITDA margin ~12%. Facing tariff headwinds (~$9M in Q3) and Mexico facility remediation costs. Main risk: execution on class action allegations. Extruded Solutions ~$720M FY26E (~38% rev) 🟢 ramping Legacy Quanex vinyl profiles for window frames. Q3 sales +2.8% YoY on price mix. EBITDA margin ~19.8% (best in portfolio). Beneficiary of R&R spending resilience and modest price hikes. Sticky OEM customer relationships. Custom Solutions ~$440M FY26E (~23% rev) 🟢 ramping Cabinet components, IG spacer systems, engineered products. Q3 sales +8.5% YoY on new business wins and 3% volume. EBITDA margin ~10.8%. Strongest growth engine, expanding relationships with Cabinetworks and Masterbrand.
Legal, regulatory and risk analysis
SWOT analysis
- +Diversified 3-segment portfolio post-Tyman with cross-sell optionality
- +Strong FCF conversion (~70% of adj. EBITDA), 15% FCF yield at current price
- +Sticky OEM customer relationships (Andersen, Pella, Marvin, Cabinetworks)
- +Q3 FY26 delivered gross margin expansion and pricing gains despite soft volumes
- +Trading at 30-40% EV/EBITDA discount to higher-quality peers ROCK, SSD
- −Leverage 2.8x above management's own 1.0-1.5x target range
- −9-month FY26 adj. EBITDA margin dropped to 10.5% from 12.8% (200bps compression)
- −Hardware Solutions (largest segment) shrinking on volume: −2.7% Q3
- −Active class action creates opacity around Tyman integration true costs
- −Cyclical exposure with limited pricing power in downturn extremes
- →Full realization of $30M Tyman synergies (only ~50% delivered YTD)
- →Housing recovery in 2027 on Fed rate cuts and pent-up demand
- →Custom Solutions share gains with Cabinetworks and Masterbrand
- →Energy-efficient product tailwind (IRA extensions, EU regulatory push)
- →Deleveraging to 1.5x opens M&A window at trough valuations
- !Class action settlement > $80M plus Tyman remediation capex $150M+
- !Housing double-dip if Fed cuts stall or mortgage rates rise back to 7%+
- !Tariff regime changes and cross-border supply chain (Mexico)
- !Customer concentration: top 10 = ~35% of revenue
- !Competing entrants in commodity extruded profiles pressuring margins
Summary by assessment area
- Leverage 2.8x above target 1.0-1.5x
- FCF strong ~$140M LTM, ~15% yield
- Liquidity $363M, adequate but not abundant
- Buyback capacity ($28.7M) subordinate to debt paydown
- Active securities class action for Tyman disclosure
- Lead plaintiff deadline passed, case proceeding
- Potential exposure $20-80M plus fees
- Management distraction risk over 18-24 months
- FV base case $26.5 vs price $19.74 (+34%)
- FV in line with consensus $27.25
- EV/EBITDA 7.5x vs peer median ~9-10x
- FCF yield ~15% signals cash-return capability
Sources: Quanex Q3 FY26 earnings release (2026-09-03, stocktitan.net); Investing.com Q3 2026 earnings call transcript; StockAnalysis.com NX overview and revenue history; MarketBeat NX historical prices; ValueInvesting.io NX and ROCK EV/EBITDA multiples; StockAnalysis.com ROCK, JELD statistics; Kessler Topaz Meltzer & Check class action filing; StockAnalysis.com NX analyst forecast; AAII NX article. Market data — last verified close 2026-09-25: NX $19.74, market cap ~$897M, 52W range $11.04–$23.33, ~45.4M shares outstanding. Short interest ~6.4%. ⚠️ This document is for informational purposes only and does not constitute financial or investment advice.