We recently published a list of 10 Most Undervalued Growth Stocks to Buy Now. In this article, we are going to take a look at where ​Builders FirstSource, Inc. (NYSE:BLDR) stands against other most undervalued growth stocks to buy now.

Growth stocks are companies that grow their revenues and earnings at a faster rate than the overall market does. To identify the true growth stocks, we believe it is important to use a high enough benchmark over a long enough period. In this case, we define growth stocks as companies that managed to achieve a 5-year revenue compounded annual growth rate (CAGR) of at least 20%. It is obvious that all else equal, investors would prefer growth stocks, but the truth is that their high valuations and perceived expensiveness may often make them less attractive. It is not rare that high-growth companies end up underperforming simply because their initially high forward P/E ratio gradually contracts over time, partially or entirely offsetting the contribution of high earnings growth. So, the ultimate grail of investing consists in identifying undervalued growth stocks that would continue to grow rapidly and at the same time maintain or even expand their trading multiple.

READ ALSO: 10 Best Undervalued Stocks to Buy According to Billionaires

The growth factor has underperformed year-to-date as the entire US stock market has retracted by more than 15% since its early 2025 highs. The growth stocks performed worse than the market because capital flows to safety assets such as defensive value stocks and gold; the latter is up more than 30% this year, and its price returns actually exceed those of the entire US stock market over the last 10 years. Such situations are rare, and the truth is, by the time growth stocks become cheap enough, many retail investors are no longer willing to buy. This is exactly what’s happening now, as the CNN Fear & Greed index shows a value of 20/100, showcasing an “Extreme Fear” in the markets. This public fear is amplified by the tariff turmoil, especially as the broader market is showing a “Death Cross” on the technical charts. Similar to Warren Buffett’s teachings to be greedy when others are fearful, we maintain our optimistic stance for the long-term financial and economic health of the US and its stock market.

The emergence of the “Death Cross” signal on the technical chart turns out to be not as scary as perceived by the masses – empirical research shows that the broader market is actually expected to post a positive return of 1% over the 50 days, following the crossing of the 50 daily simple moving average below the 200 daily one, which already occurred on April 11. We don’t claim that history will repeat itself this time; we want to illustrate that this widely discussed and feared event does not have much substance behind it.

Moreover, the US economy remains resilient, all while President Trump removed his foot off the tariff gas pedal and is gradually granting exemptions to key consumer products like electronic devices. Employment data has been one of the most reliable indicators of recessions, and the latest US data shows that March employment did not show any sequential decline compared to February and is only marginally below the 2023-2024 level. Most of the decline compared to 2023-2024 comes from the public sector and only impacted a minority of workers, which is not enough to trigger a widespread economic slowdown.

The US administration is hinting towards a possible agreement between Ukraine and Russia, which could lead to a ceasefire and a gradual return of US businesses to Russia. Such an event would induce a one-time positive shock to the market. Russia represents a giant 150 million consumer market that is significant for many US businesses. Second, the end of the conflict could very likely provide relief for energy prices around the globe, and especially in Europe. Lower energy prices are congruent with more consumer purchasing power and wider business profitability – both these factors should drive corporate earnings and valuations higher.

With that being said, the key takeaway is that markets currently reflect close to peak pessimism, all while the economic situation in the US and around the world isn’t materially worse than it was last year. Such a scenario is highly favorable for growth stocks – not only does the currently depressed market offer more undervalued candidates to invest in, but also hints towards a potential economic acceleration if Russia and Ukraine do reach a deal under the supervision of the US administration.

Our Methodology

To compile our list of most undervalued growth stocks, we used a stock screener to filter for companies that have at least 20% revenue CAGR in the last 5 years, and that trade below 15x forward P/E. Then we compared the list with our proprietary database of hedge funds’ ownership and included in the article the top 10 stocks with the highest number of hedge funds that own the stock as of Q4 2024. The stocks are ranked in descending order of their forward P/E ratio.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).

Builders FirstSource, Inc. (NYSE:BLDR)

Forward P/E ratio: 10.64

Revenue CAGR last 5 years: 27.08%

Number of Hedge Fund Holders: 59

​Builders FirstSource, Inc. (NYSE:BLDR) is a supplier of building materials and manufactured components to professional homebuilders, remodelers, and commercial contractors in the US. The company’s large scale of operations makes it a key supplier to the construction sector, with the product portfolio including lumber, engineered wood, windows, doors, and roofing, among others. BLDR also provides value-added services such as design, estimating, and installation.

Builders FirstSource, Inc. (NYSE:BLDR) demonstrated resilience in 2024 with strong financial performance, achieving a mid-teens adjusted EBITDA margin and nearly 33% gross margin despite market challenges. The company invested over $75 million in value-added facilities, opened two new truss manufacturing facilities, upgraded 19 truss facilities, and enhanced 13 millwork locations. Digital platform adoption showed progress with $134 million in incremental sales in 2024, and the company expects additional incremental sales of approximately $200 million in 2025. The company also completed 13 acquisitions in 2024 with aggregate prior year sales of roughly $420 million, demonstrating continued execution of its growth strategy.

Looking ahead to 2025, Builders FirstSource, Inc. (NYSE:BLDR) faces headwinds from continued weakness in multifamily construction and affordability challenges in single-family housing. However, the company maintains a strong financial position with a healthy balance sheet, consistently strong cash flow generation, and multiple paths for value creation through organic growth, acquisitions, and share repurchases. Management forecasts net sales between $16.5 billion to $17.5 billion, representing a 4% YoY growth at the middle of the range. BLDR’s ability to grow even during soft construction markets, coupled with an affordable 10.64 forward P/E, makes it one of the most undervalued stocks on our list.

Overall, BLDR ranks 5th on our list of most undervalued growth stocks to buy now. While we acknowledge the potential of BLDR to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for an AI stock that is more promising than BLDR but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires.

Disclosure: None. This article is originally published at Insider Monkey.