Installed Building Products, Inc. (IBP) stock intrinsic value fair value estimate & owner earnings analysis

Installed Building Products installs insulation and complementary products (waterproofing, fireproofing, garage doors, gutters, shower doors, closet shelving and others) for new and existing homes and commercial buildings through a network of more than 250 branches covering the 48 continental states and the District of Columbia. Installation is 93% of revenue; the rest comes from regional distribution and cellulose manufacturing. Revenue in 2025 was $2,970.8 million, up 1.0%, and cash from operations was $371.4 million. How we measured earnings. We start from cash from operations, remove the swings in working capital, and subtract stock compensation and the part of capital spending needed to stand still. On that basis owner earnings per share were $2.80 (2018), $3.87, $5.14, $6.67 (2021), $11.54, $10.81, $10.89 (2024) and $12.44 (2025). We use the median of 2021-2025, $10.90 per share, as the normal level. The window starts in 2021 because earlier years describe a much smaller business before the 2021-2022 growth in revenue, and it deliberately sits below 2025, which benefited from strong commercial pricing and mix. Working capital consumed cash in every one of the last nine years, so removing it lifts owner earnings; we could not tie roughly $18 million of 2025 operating cash flow to separately reported lines, and if that gap were also working capital the 2025 figure would be about 5% lower. Note also that the per-share figures are helped by a shrinking share count (29.6 million diluted shares in 2021 to 27.3 million in 2025); we give no credit for future buybacks. Recent trend. In 2025 residential same-branch sales fell 4.4% (single-family down 4.1%, multi-family down 5.7%) and same-branch job volume fell 5.7%, offset by 1.6% better price and mix and by commercial same-branch growth of 10.4%, concentrated in heavy commercial projects. In the first half of 2026 revenue was $1,438.3 million versus $1,445.1 million a year earlier, net income $99.7 million versus $114.4 million, and operating cash flow $171.1 million versus $182.5 million. Owner earnings per share grew 14.2% in 2025 (about 10.7% in total dollars, the rest from fewer shares); for the base case we assume 0% growth from the normal level, below that trailing rate, because volumes are falling and the first-half 2026 results are softer, not stronger. Base case: about $156 per share. Owner earnings stay at $10.90 per share for ten years, then fade 2% a year. What we credit: a network of 250 branches with a number one or two position in single-family insulation installation, which has held owner earnings between $10.81 and $12.44 through a period when single-family same-branch sales fell 9.0% in 2023 and 4.1% in 2025. We do not credit growth from housing recovery, share gains, margin expansion, or management's goal of acquiring at least $100 million of annual revenue in 2026. The fade reflects that acquired customer relationships and installed branches wear down unless replaced; the company's yearly tuck-in acquisitions ($51.5 million spent in 2025 for seven businesses expected to add about $53.3 million of revenue, $88.6 million in 2024) are treated as offsetting that wear, not adding to it. Bear case: about $91 per share. Owner earnings drop to $7.00 per share (about a third below normal) and never recover, fading 4% a year after year ten. Named drivers: residential job volumes have already fallen 8.4% (2023) and 5.7% (2025) on a same-branch basis; the 2025 commercial strength and price gains could reverse; and if the $60 million of yearly working-capital outflow proves to be a permanent cost of running the business rather than timing, about $2.20 per share of owner earnings is overstated. Leverage is also relevant here: the company carries about $886 million of debt (long-term $850.0 million plus $36.6 million current at the end of 2025), and in January 2026 it issued $500 million of 5.625% notes due 2034 to redeem the 5.75% notes due 2028. Interest is already deducted in operating cash flow, so we do not subtract debt again, but it is what makes a weaker outcome worse for shareholders. Bull case: about $218 per share. Owner earnings return to the $12.44 reached in 2025 and grow 2% a year for ten years, then fade 1% a year. The 2% comes from the tuck-in acquisition program, which has run every year and is funded from cash (the company held $321.9 million and had not drawn its revolver at the end of 2025), and it is kept below the demonstrated pace. What would make this wrong: a deeper or longer housing downturn than 2023 and 2025, loss of the commercial price and mix gains, or acquisitions that fail to earn their cost. The company appears to have adequate cash and debt maturities are well spaced, but we could not verify the share-count assumptions beyond the reported figures. We do not attempt to value the shares against any market price here.