QXO (QXO -2.02%) is a newcomer to public markets with big plans to roll up the building products distribution industry. The company hasn't made a lot of news yet, but its impressive list of executives and backers has investors on notice.
Shares of QXO traded up as much as 23.7% this week and were up 14% as of midday Thursday, according to data provided by S&P Global Market Intelligence, as investors buy in ahead of the company making its first big move.
Buying in ahead of the deals
QXO is the latest venture from Brad Jacobs, a serial entrepreneur who previously founded and built United Waste Systems, United Rentals, and XPO Logistics. Earlier this year, Jacobs and other investors took control of software company Silversun Technologies and renamed it QXO, staking it with $5 billion to be used to acquire construction and building products distributors.
Currently, QXO is difficult to value. The company is largely just that pile of cash and a game plan to use mergers and acquisitions (M&A) to create a distributor with $50 billion in revenue over the next decade. But Jacobs, thanks to his history, has a lot of credibility, and investors have been eager to buy in ahead of the first deal announcement.
A recent report by Oppenheimer struck a positive tone, calling the building products industry "ripe" for consolidation and commending Jacobs for his past successes. The analysts have not yet assigned a rating to the shares.
Is QXO stock a buy?
Investing often involves valuing a stock based on its potential for future growth and not on the company's current financials, but it is rare to find a stock with so little to report about its current business. Jacobs generated market-crushing returns in his past endeavors, and those buying in today believe he is likely to repeat that success at QXO.
There is good reason for growth investors who can handle volatility to be interested, but valuation should be considered. At current prices, and factoring in warrants, QXO today has a market capitalization of more than $11 billion. If all goes to plan, the company should easily grow into that valuation. But investors need to be aware QXO is still under construction.
