Trex (TREX) is "well positioned" to see margin expansion starting in 2027 and continuing in the years ahead, UBS Securities said in a report Tuesday.

UBS said Trex is positioned to return to high single-digit annual sales growth beginning in 2027 after five years of below-trend performance weighed down by the pandemic and weak consumer confidence. Revenue is forecast to rise about 9% a year starting in 2027, driven by modest growth in the repair-and-remodel market, composite decking material conversion, and gains from the company's railing initiative, according to the report.

While 2026 is expected to bring near-term "headwinds," including higher selling, general and administrative expenses, stepped-up depreciation at the Little Rock, Arkansas facility, and pressure from product mix, UBS said those risks are now "well understood," setting the stage for margin expansion in 2027 and beyond, the report said.

UBS upgraded Trex to buy from neutral, and raised its price target to $52 from $50, adding that "the pullback in TREX shares has created an attractive buying opportunity."

Shares of the company were up more than 4% in recent Tuesday trading.

Price: 37.92, Change: +1.70, Percent Change: +4.68