Boise Cascade has gotten torched over the last six months - since September 2024, its stock price has dropped 26.8% to $100.39 per share. This might have investors contemplating their next move.

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Even with the cheaper entry price, we're cautious about Boise Cascade. Here are three reasons why we avoid BCC and a stock we'd rather own.

Why Do We Think Boise Cascade Will Underperform?

Formed through the merger of two lumber companies, Boise Cascade Company (NYSE:BCC) manufactures and distributes wood products and other building materials.

1. Revenue Tumbling Downwards

We at StockStory place the most emphasis on long-term growth, but within industrials, a stretched historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Boise Cascade’s recent history marks a sharp pivot from its five-year trend as its revenue has shown annualized declines of 10.5% over the last two years.

2. EPS Took a Dip Over the Last Two Years

While long-term earnings trends give us the big picture, we also track EPS over a shorter period because it can provide insight into an emerging theme or development for the business.

Sadly for Boise Cascade, its EPS declined by more than its revenue over the last two years, dropping 33.4%. This tells us the company struggled to adjust to shrinking demand.

3. New Investments Fail to Bear Fruit as ROIC Declines

A company’s ROIC, or return on invested capital, shows how much operating profit it makes compared to the money it has raised (debt and equity).

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, Boise Cascade’s ROIC has unfortunately decreased significantly. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities.

Final Judgment

Boise Cascade falls short of our quality standards. After the recent drawdown, the stock trades at 9.8× forward price-to-earnings (or $100.39 per share). While this valuation is optically cheap, the potential downside is huge given its shaky fundamentals. There are more exciting stocks to buy at the moment. We’d suggest looking at our favorite semiconductor picks and shovels play .

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