We’ve been patiently watching Masonite. Until recently, the Florida-based maker of doors had relied on cutting costs to drive profits. We’ve been waiting for Masonite’s sales to grow consistently and ignite profits, and to cross the threshold into our portfolio.

Masonite (NYSE: DOOR) finally caught the wave of improving home starts in the fourth quarter of last year. The stock leaped 14% on that first sign of demand and stepped up another 6% when first-quarter results confirmed the bump in business. We weren’t quick enough to catch the stock’s fleeting Brexit sell-off but think the sound fundamentals justify another 30% move.

Target: $88

New Doors Are Opening

Rising revenue fuels the healthiest profit growth, as cutting expenses to accelerate earnings only goes so far. Even after a budget is trimmed of excess fat, earnings may be stagnant unless the company can rekindle its revenue. Masonite found itself in that position last year. Revenue increased only a meager 2% in 2015 and even suffered through a few quarterly declines. This was despite low single-digit annual price increases that padded profits.

The first signs of life came in the fourth quarter, when the demand for Masonite doors picked up. In all but one of the preceding seven quarters, pricing made up the lion’s share of any revenue increase. But in that final 2015 quarter and continuing into the first quarter this year, sales volume drove 70% of revenue growth.

Along with new home starts, remodeling projects are also surging. Plus, several company-specific trends are boosting Masonite’s revenue. Chief among them is a product mix that includes more new premium-priced lines.

Masonite’s Heritage and Visa Grande product lines, introduced last year, command much higher prices than the simple hollow doors that made up the bulk of the company’s sales 10 years ago. These solid wood Shaker-style exterior doors or leaded fiberglass patio doors can cost as much as $800 versus $60 for an average door. As these high-end doors account for more of the product mix, Masonite’s revenue and profit margins rise.

Frederick J. Lynch, Masonite’s chief executive officer and president, raved about the popularity of these new products at an investor conference in June: “Today, the consumer, the builder, the contractor, they’re looking for higher-end products and starting to trade up to solid core over hollow core, fiberglass over steel, and then new designs and configurations for interior designs such as the new Heritage Series that we just brought to market last year. That’s doing gangbusters. Consumers just love that product.”

Also pushing sales volume higher is Lowe’s decision to feature Masonite doors for its new professional line of products. This new program, cutely named LowesforPros, was designed for professional contractors. Masonite started shipping to Lowe’s toward the end of 2015. Home Depot, a long-time Masonite customer, accounts for 16% of sales.

A Wave of Demand

Masonite’s earnings exploded last year with little help from a booming home-building market. Earnings per share in 2015 equaled $1.49, up from a loss of 68 cents, and should nearly double to $2.88 this year before growing 33% in 2017.

Just over 60% of Masonite’s revenue comes from the North American residential market.  Of that revenue, new homes built generated 45% and remodeling projects 55%. We like the secular winds behind both these markets. New home starts have been gaining steam since the nadir in 2009, and remodels are staying strong thanks to a healthy employment market and confident consumers.

While 2015 housing starts were double the 2009 bottom, they were still almost 50% below the 2005 peak. Starts are expected to grow 10% for at least the next two years.

According to the U.S. Census Bureau, single-family, new-home starts are up 17% in the first quarter. Adding to this growth is the backlog from homes that builders started last year but haven’t yet finished.

National home builders KB Home and Lennar both recently reported robust sales. KB Home sold 30% more units in the first quarter than a year ago and had a 10% unit increase in backlog. Lennar saw 12% growth in both deliveries and backlog.

Unlocking Potential

Architectural sales, which represent 16% of total sales, are an opportunity for Masonite to capitalize on the growth in commercial building. This segment is less profitable than the North American business due to the lower price points of the doors installed in hotels and office buildings. A recent price increase should help to bolster profitability in this group.

European sales, which are almost all in the U.K., make up 17% of revenue and pose a risk to growth if the post-Brexit British economy falls into recession. Masonite has acquired two British companies in the past year to try and transform its European business into a growth sector.

An Open-and-Shut Case

We like the strength in Masonite’s underlying business. Significant manufacturing capacity was taken out of the market after the housing bust, reducing the chance of price competition if unit growth slows.

Masonite reports second-quarter earnings in early August. Last year’s second-quarter revenue declined when sales shifted after a price change. This makes the revenue and earnings growth a bit easier for the company this year. With the second and third quarters traditionally delivering the highest revenue of the year, we suggest subscribers buy Masonite before the door slams shut.