Why QXO Shares Soared This Week

QXO (QXO 9.03%) is a newcomer to the public markets with big plans to grow the building products distribution industry. The company hasn’t made a ton of news yet, but its impressive list of executives and backers has investors taking notice.

Shares of QXO have traded as much as 23.7 percent this week and were up 14 percent by midday Thursday, according to data from S&P Global Market Intelligence, as investors buy before the company makes its first big move.

Shop before the deals

QXO is the latest venture from Brad Jacobs, a serial entrepreneur who previously founded and built United Waste Systems, United Rentalsand XPO Logistics. Earlier this year, Jacobs and other investors took control of software company Silversun Technologies and renamed it QXO, betting $5 billion on it to be used to acquire distributors of building and construction products.

Currently, QXO is difficult to rate. The company is mostly just that pile of cash and a game plan to use mergers and acquisitions (M&A) to create a $50 billion revenue distributor over the next decade. But Jacobs, because of its history, has a lot of credibility, and investors were eager to buy before the first deal was announced.

A recent report by Oppenheimer set a positive tone, calling the building products industry “ripe” for consolidation and praising Jacobs for its past successes. Analysts have not yet assigned a rating to the shares.

Is QXO stock a buy?

Investing often involves valuing a stock based on its future growth potential rather than the company’s current financials, but it’s rare to find a stock with so little to report about its current business. Jacobs has generated market-crushing returns in his previous efforts, and those buying today believe he is likely to repeat that success in QXO.

There are good reasons for growth investors who can handle volatility to be interested, but valuation should be considered. At current prices and factoring in warrants, QXO has a market cap of over $11 billion today. If all goes according to plan, the company should easily rise in this valuation. But investors need to know that QXO is still under construction.