Building products manufacturer Simpson (NYSE: SSD) beat Wall Street’s revenue expectations in Q3 CY2025, with sales up 6.2% year on year to $623.5 million. Its GAAP profit of $2.58 per share was 6.9% above analysts’ consensus estimates.

Is now the time to buy Simpson? Find out by accessing our full research report, it’s free for active Edge members.

"We delivered solid third quarter results despite ongoing softness in residential housing markets across the U.S. and Europe," said Mike Olosky, President and Chief Executive Officer of Simpson Manufacturing Co., Inc.

Company Overview

Aiming to build safer and stronger buildings, Simpson (NYSE: SSD) designs and manufactures structural connectors, anchors, and other construction products.

Revenue Growth

A company’s long-term performance is an indicator of its overall quality. Any business can have short-term success, but a top-tier one grows for years. Thankfully, Simpson’s 13.3% annualized revenue growth over the last five years was excellent. Its growth beat the average industrials company and shows its offerings resonate with customers.

Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Simpson’s recent performance shows its demand has slowed significantly as its annualized revenue growth of 2.8% over the last two years was well below its five-year trend.

This quarter, Simpson reported year-on-year revenue growth of 6.2%, and its $623.5 million of revenue exceeded Wall Street’s estimates by 3.1%.

Looking ahead, sell-side analysts expect revenue to grow 3.6% over the next 12 months, similar to its two-year rate. This projection doesn't excite us and implies its newer products and services will not accelerate its top-line performance yet.

Today’s young investors won’t have read the timeless lessons in Gorilla Game: Picking Winners In High Technology because it was written more than 20 years ago when Microsoft and Apple were first establishing their supremacy. But if we apply the same principles, then enterprise software stocks leveraging their own generative AI capabilities may well be the Gorillas of the future. So, in that spirit, we are excited to present our Special Free Report on a profitable, fast-growing enterprise software stock that is already riding the automation wave and looking to catch the generative AI next.

Operating Margin

Simpson has been a well-oiled machine over the last five years. It demonstrated elite profitability for an industrials business, boasting an average operating margin of 21.5%. This result isn’t surprising as its high gross margin gives it a favorable starting point.

Analyzing the trend in its profitability, Simpson’s operating margin decreased by 1.5 percentage points over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

This quarter, Simpson generated an operating margin profit margin of 22.6%, up 1.1 percentage points year on year. The increase was encouraging, and because its operating margin rose more than its gross margin, we can infer it was more efficient with expenses such as marketing, R&D, and administrative overhead.

Earnings Per Share

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Simpson’s remarkable 14.2% annual EPS growth over the last five years aligns with its revenue performance. This tells us it maintained its per-share profitability as it expanded.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

Simpson’s flat two-year EPS was bad and lower than its 2.8% two-year revenue growth.

Diving into the nuances of Simpson’s earnings can give us a better understanding of its performance. While we mentioned earlier that Simpson’s operating margin expanded this quarter, a two-year view shows its margin has declined. This was the most relevant factor (aside from the revenue impact) behind its lower earnings; interest expenses and taxes can also affect EPS but don’t tell us as much about a company’s fundamentals.

In Q3, Simpson reported EPS of $2.58, up from $2.21 in the same quarter last year. This print beat analysts’ estimates by 6.9%. Over the next 12 months, Wall Street expects Simpson’s full-year EPS of $8.21 to grow 2.9%.

Key Takeaways from Simpson’s Q3 Results

We enjoyed seeing Simpson beat analysts’ revenue expectations this quarter. We were also glad its EPS outperformed Wall Street’s estimates. On the other hand, its EBITDA missed. Overall, this print was mixed. The stock remained flat at $175.85 immediately after reporting.

Sure, Simpson had a solid quarter, but if we look at the bigger picture, is this stock a buy? What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock. We cover that in our actionable full research report which you can read here, it’s free for active Edge members.