Financial Contrast: United Rentals (NYSE:URI) and Advanced Drainage Systems (NYSE:WMS)

United Rentals (NYSE:URI) and Advanced Drainage Systems (NYSE:WMS) are both construction companies, but which is the better investment? We will compare the two businesses based on the strength of their risk, valuation, analyst recommendations, institutional ownership, earnings, dividends and profitability.

Analyst Ratings

This is a summary of current ratings and recommmendations for United Rentals and Advanced Drainage Systems, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
United Rentals	1	5	8	1	2.60
Advanced Drainage Systems	0	1	7	0	2.88

United Rentals presently has a consensus price target of $766.23, indicating a potential downside of 2.33%. Advanced Drainage Systems has a consensus price target of $139.88, indicating a potential upside of 17.74%. Given Advanced Drainage Systems’ stronger consensus rating and higher possible upside, analysts clearly believe Advanced Drainage Systems is more favorable than United Rentals.

Risk and Volatility

United Rentals has a beta of 1.69, indicating that its share price is 69% more volatile than the S&P 500. Comparatively, Advanced Drainage Systems has a beta of 1.24, indicating that its share price is 24% more volatile than the S&P 500.

Institutional & Insider Ownership

96.3% of United Rentals shares are held by institutional investors. Comparatively, 89.8% of Advanced Drainage Systems shares are held by institutional investors. 0.5% of United Rentals shares are held by insiders. Comparatively, 1.6% of Advanced Drainage Systems shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Dividends

United Rentals pays an annual dividend of $7.16 per share and has a dividend yield of 0.9%. Advanced Drainage Systems pays an annual dividend of $0.72 per share and has a dividend yield of 0.6%. United Rentals pays out 18.5% of its earnings in the form of a dividend. Advanced Drainage Systems pays out 12.5% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. United Rentals has raised its dividend for 3 consecutive years and Advanced Drainage Systems has raised its dividend for 1 consecutive years. United Rentals is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Earnings and Valuation

This table compares United Rentals and Advanced Drainage Systems”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
United Rentals	$15.35 billion	3.32	$2.58 billion	$38.62	20.31
Advanced Drainage Systems	$2.90 billion	3.18	$450.17 million	$5.76	20.63

United Rentals has higher revenue and earnings than Advanced Drainage Systems. United Rentals is trading at a lower price-to-earnings ratio than Advanced Drainage Systems, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares United Rentals and Advanced Drainage Systems’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
United Rentals	16.38%	33.11%	10.11%
Advanced Drainage Systems	15.50%	32.33%	12.88%

Summary

United Rentals beats Advanced Drainage Systems on 12 of the 18 factors compared between the two stocks.

About United Rentals

United Rentals, Inc., through its subsidiaries, operates as an equipment rental company. It operates in two segments, General Rentals and Specialty. The General Rentals segment rents general construction and industrial equipment includes backhoes, skid-steer loaders, forklifts, earthmoving equipment, and material handling equipment; aerial work platforms, such as boom and scissor lifts; and general tools and light equipment comprising pressure washers, water pumps, and power tools for construction and industrial companies, manufacturers, utilities, municipalities, homeowners, and government entities. The specialty segment rents specialty construction products, including trench safety equipment consists of trench shields, aluminum hydraulic shoring systems, slide rails, crossing plates, construction lasers, and line testing equipment for underground work; power and heating, ventilating, and air conditioning equipment, such as portable diesel generators, electrical distribution equipment, and temperature control equipment; fluid solutions equipment for fluid containment, transfer, and treatment; and mobile storage equipment and modular office space. This segment serves construction companies involved in infrastructure projects, and municipalities and industrial companies. It also sells aerial lifts, reach forklifts, telehandlers, compressors, and generators; construction consumables, tools, small equipment, and safety supplies; and parts for equipment that is owned by its customers, as well as provides repair and maintenance services. The company sells used equipment through its sales force, brokers, website, at auctions, and directly to manufacturers. The company operates in the United States, Canada, Europe, Australia, and New Zealand. United Rentals, Inc. was incorporated in 1997 and is headquartered in Stamford, Connecticut.

About Advanced Drainage Systems

Advanced Drainage Systems, Inc. designs, manufactures, and markets thermoplastic corrugated pipes and related water management products in North America and internationally. The company operates through Pipe, International, Infiltrator, and Allied Products & Other segments. It offers single, double, and triple wall corrugated polypropylene and polyethylene pipes; plastic leachfield chambers and systems; EZflow synthetic aggregate bundles; wastewater purification through mechanical aeration wastewater for residential and commercial systems; septic tanks and accessories; combined treatment and dispersal systems, including advanced enviro-septic and advanced treatment leachfield systems; and allied products, including storm retention/detention and septic chambers, polyvinyl chloride drainage structures, fittings, and water quality filters and separators. The company also purchases and distributes construction fabrics and other geosynthetic products for soil stabilization, reinforcement, filtration, separation, erosion control, and sub-surface drainage, as well as drainage grates and other products. In addition, it provides PVC hubs, rubber sleeves, and stainless-steel bands. The company offers its products for non-residential, residential, agriculture, and infrastructure applications through a network of distribution centers. Advanced Drainage Systems, Inc. incorporated in 1966 and is headquartered in Hilliard, Ohio.