Simpson Manufacturing (NYSE: SSD) and Foundation Building Materials (NYSE:FBM) are both construction companies, but which is the better stock? We will compare the two businesses based on the strength of their analyst recommendations, dividends, institutional ownership, earnings, profitability, risk and valuation.

Institutional and Insider Ownership

84.9% of Simpson Manufacturing shares are held by institutional investors. Comparatively, 90.0% of Foundation Building Materials shares are held by institutional investors. 0.4% of Simpson Manufacturing shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Analyst Ratings

This is a summary of recent recommendations for Simpson Manufacturing and Foundation Building Materials, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Simpson Manufacturing 0 1 0 0 2.00
Foundation Building Materials 0 2 7 0 2.78

Foundation Building Materials has a consensus price target of $18.43, indicating a potential upside of 57.37%. Given Foundation Building Materials’ stronger consensus rating and higher possible upside, analysts clearly believe Foundation Building Materials is more favorable than Simpson Manufacturing.

Profitability

This table compares Simpson Manufacturing and Foundation Building Materials’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Simpson Manufacturing 10.78% 10.26% 8.96%
Foundation Building Materials N/A N/A N/A

Valuation and Earnings

This table compares Simpson Manufacturing and Foundation Building Materials’ top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Simpson Manufacturing $914.03 million 2.20 $171.24 million $2.05 20.71
Foundation Building Materials $1.89 billion 0.27 $108.42 million N/A N/A

Simpson Manufacturing has higher revenue, but lower earnings than Foundation Building Materials.

Dividends

Simpson Manufacturing pays an annual dividend of $0.84 per share and has a dividend yield of 2.0%. Foundation Building Materials does not pay a dividend. Simpson Manufacturing pays out 41.0% of its earnings in the form of a dividend. Simpson Manufacturing has increased its dividend for 3 consecutive years.

Summary

Simpson Manufacturing beats Foundation Building Materials on 8 of the 14 factors compared between the two stocks.

Simpson Manufacturing Company Profile

Simpson Manufacturing Co., Inc., through its subsidiary, Simpson Strong-Tie Company Inc. (SST), designs, engineers and manufactures wood construction products, including connectors, truss plates, fastening systems, fasteners and pre-fabricated lateral systems used in light-frame construction. The Company’s segments are North America, Europe, Asia/Pacific, and Administrative & All Other. The North America segment includes operations primarily in the United States and Canada. The Europe segment includes operations primarily in France, the United Kingdom, Germany, Denmark, Switzerland, Portugal, Poland, the Netherlands and Belgium. The Asia/Pacific segment includes operations primarily in Australia, New Zealand, South Africa, China, Taiwan and Vietnam. The Company manufactures concrete construction products used for concrete, masonry, steel construction and for concrete repair, protection and strengthening, including adhesives, chemicals and mechanical anchors.

Foundation Building Materials Company Profile

Foundation Building Materials, Inc. is a specialty distributor of wallboard and suspended ceiling systems in the United States and Canada. The Company’s segments include Specialty Building Products and Mechanical Insulation. The Company fabricates and distributes its products for specialty contractors seeking to improve or maintain energy efficiency in a range of commercial and industrial buildings. It serves markets across the United States and in Canada. Specialty building products segment distributes wallboard and accessories, metal framing, suspended ceiling systems and other products. Other products include stucco and Exterior insulation and finish system (EIFS), as well as offerings, such as tools, safety accessories and fasteners. Its Mechanical insulation segment includes insulation solutions for pipes and mechanical systems and the primary end markets served are new non-residential construction, non- residential repair and remodel construction and industrial markets.

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