Fletcher Building stock closed at NZ$3.97 today after the market weighed a long awaited return to profitability against a still cautious outlook. Short term traders see a building products group that has swung back to a positive net profit after tax of NZ$228m and posted earnings per share of NZ$0.212. Longer term holders are more focused on what that profit means for a turnaround that has been years in the making.

The real headline is simple: the loss making chapter has closed and the next test is whether this leaner Fletcher Building can now earn its cost of capital and justify the current P/E multiple.

Is Fletcher Building at 21.4x P/E and an estimated 31% discount to fair value a genuine mispricing, or is it simply lagging its…