Wolfe Research upgraded Trex (NYSE: TREX) to Outperform from Peer Perform and set a $47 price target. Shares rose more than 1% in pre-market trading on Wednesday.

The firm noted that Trex shares had fallen nearly 50% in 2025, underperforming the broader building products group by roughly 27 percentage points. While Wolfe acknowledged investor concerns about future market share gains following James Hardie's acquisition of AZEK, it said the magnitude of the selloff had created an excessive valuation discount.

Trex was trading at 12.3x Wolfe's 2026 EBITDA estimate, representing a 44% discount to its long-term average multiple and a 53% discount to its 2018-2024 average. Wolfe said returns had declined as Trex invested in capacity, carried higher inventory under its even-flow production model, and increased SG&A spending amid muted market growth. Despite this, the firm projected a 16% ROIC in 2026, the second-highest in its coverage universe, and said the decking industry's growth profile warranted a premium valuation. The $47 target implied a roughly 15x EV/EBITDA multiple.