Reece (ASX:REH) Shares Carry A Premium As Margins Stall

Reece closed at A$16.90 on Monday, with the stock roughly flat over the past week but still well ahead over three months. That calm finish sits in sharp contrast to what the latest full year numbers actually say about sentiment. The company just turned A$9.4b of revenue into A$0.495 of earnings per share and lifted its dividend to A$0.1884 while also returning about A$401m through buybacks. The market is paying a P/E of 33.7x for that mix of modest margin pressure and ongoing capital returns. The real question now is whether that premium still feels comfortable.

Is Reece a justifiable quality premium at a 33.7x P/E, or is the stock already pricing in too much growth? See whether the current A$16.90 share price lines up with our valuation analysis for Reece

FY 2026 Earnings Summary

• Revenue (FY 2026 vs FY 2025): A$9,378.43m vs A$8,978.38m (up about 4.5%)
• Net Income from Continuing Operations (FY 2026 vs FY 2025): A$308.16m vs A$316.94m (down about 2.8%)
• Basic EPS (FY 2026 vs FY 2025): A$0.495 vs A$0.492 (broadly steady)
• EBITDA (FY 2026 vs FY 2025): A$901m vs A$901m (flat)

Prefer clear charts instead of another wall of earnings tables and footnotes? See Reece's full financial picture, including its valuation, laid out in an easy visual format in our company report for Reece.

Reece bull case hinges on execution, not just growth

Bulls argue Reece can turn U.S. expansion, digital tools and premium products into a steady lift in margins and returns. The latest year partly supports that. Group revenue reached A$9.4b and ANZ delivered volume led growth with about 2% price contribution and higher EBIT, which suggests the domestic network and product mix are doing their job. Management also pushed ahead with U.S. branch openings, digital tools like Copilot and the maX app, and new showrooms. These are the building blocks the growth story relies on. However, EBITDA held at A$901m and group EBIT declined, so the margin step up that bulls often point to is not yet visible at group level. U.S. like for like sales slipped and EBIT in that region fell, which shows the growth engines are still in investment mode rather than proving the higher margin thesis.

Reece bear case tests U.S. rollout and margin pressure

Bears worry that Reece is spending heavily on a slow U.S. rollout, with soft demand and thinner margins, while taking on more operational complexity. The results give that concern some backing. U.S. sales grew through branch expansion, yet like for like revenue declined 1.7% and U.S. EBIT fell 13% as new sites weighed on profitability. Group EBIT also declined despite higher sales, which shows the investment burden is real. Management now targets 15 to 20 new U.S. branches per year and flags that stores typically take 2 to 5 years to mature, so earnings pressure from immature locations could persist. At the same time, ANZ margins held up and net debt of A$744m sits at roughly 1x EBITDA, which limits balance sheet stress. The bear case on outright financial strain is not playing out, but the warning on slower margin progress is visible.

Reveal where the surface looks calm, but the models start to disagree on Reece's next big earnings inflection. Access the multi year revenue, margin and EPS analyst estimates for Reece.

Stay Ahead With Simply Wall St

If Reece's premium P/E and U.S. rollout story have your attention, register for free with Simply Wall St and add it to a Watchlist so you can track the share price against fair value and watch for a more appealing entry point. Once you are invested, use the Portfolio Command Center to keep your holdings organised and surface only the most important updates that matter to your thesis. Round that out by joining the Community to see how other investors are thinking about Reece and similar stocks. By spotting potential catalysts and risks early, you give yourself a better chance to stay ahead of the market over the long run.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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