UNDERSTANDING AZEK

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The news on the AZEK company states that it closed its 18% shares this Friday in their trading debut after the company upsized and priced its initial public offering above its price range. The company has increased by $765 million approximately in the biggest initial public offering of the week. Late Thursday, the company priced its IPO at $23 a share, above its expected range of $19 to $21 each, offering 33.25 million shares to raise $764.8 million. The maker of low-maintenance but sustainable building materials for outdoor living is listed on the New York Stock Exchange under the ticker symbol. There were 14 underwriters on the deal, led by Barclays. The Chicago-based company NYSE: AZEK at https://www.webull.com/quote/nyse-azek was in -0.80%, which used to be called CPG, says it will use proceeds to redeem debt and for general corporate purposes.

Here are some things you need to know for understanding the company in a better way:

PEERS MAKING MONEY:

Even though it posted a lot of loss, it has given the advantage for its peers to keep making money. AZEK posted a net loss of $5.8 million for the first six months of fiscal 2020 through March 31. That was narrower than the $20.8 million loss posted in the year-earlier period. Sales rose to $411.6 million from $357.4 million. AZEK’s main rival is Trex Inc according to experts.

WEAK FINANCIAL PROFILE:

AZEK faces high default risk and poor core health. An analysis of the company’s financials assigned it a financial health rating, or FHR, of 35 on a scale of 1 to 100, for the four quarters ending Sept. 30, 2019. AZEK’s Core Health Score, which measures medium-term risk and company efficiency, came to 24 out of 100.

HIGHLY LEVERAGED:

AZEK has $1.2 billion in debt. The company’s interest coverage was 0.71 times in 2019, meaning the company was unable to fully meet its interest obligations with operating profit. Interest expense rose to $83.2 million from $68.7 million. The prospectus acknowledges the risks the company would face if it is unable to generate sufficient cash to service its debt.

MATERIAL WEAKNESS IN FINANCIAL REPORTING:

There are expected to be three material weaknesses in our internal control over financial reporting, says AZEK. The first is related to maintaining an effective control environment due to a lack of resources as explained by the company. The second material weakness is related to the design and maintenance of formal accounting policies, procedures, and controls. The third material weakness is related to the design and maintenance of effective controls over certain information technology general control. You can do stock trading via the stock app with option. Disclaimer: The analysis information is for reference only and does not constitute an investment recommendation.

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