Reviewing Potlatch (NASDAQ:PCH) & Trex (NYSE:TREX)

Potlatch (NASDAQ:PCH) and Trex (NYSE:TREX) are both mid-cap construction companies, but which is the superior investment? We will contrast the two businesses based on the strength of their institutional ownership, risk, dividends, analyst recommendations, profitability, earnings and valuation.

Profitability

This table compares Potlatch and Trex’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Potlatch	3.94%	2.10%	1.29%
Trex	17.69%	22.78%	14.66%

Institutional & Insider Ownership

86.1% of Potlatch shares are held by institutional investors. Comparatively, 96.0% of Trex shares are held by institutional investors. 1.0% of Potlatch shares are held by company insiders. Comparatively, 0.7% of Trex shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Risk & Volatility

Potlatch has a beta of 1.12, meaning that its stock price is 12% more volatile than the S&P 500. Comparatively, Trex has a beta of 1.51, meaning that its stock price is 51% more volatile than the S&P 500.

Valuation & Earnings

This table compares Potlatch and Trex”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Potlatch	$1.06 billion	3.06	$21.88 million	$0.53	77.96
Trex	$1.15 billion	5.92	$226.39 million	$1.82	34.92

Trex has higher revenue and earnings than Potlatch. Trex is trading at a lower price-to-earnings ratio than Potlatch, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a summary of recent ratings and recommmendations for Potlatch and Trex, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Potlatch	0	0	7	0	3.00
Trex	1	7	7	2	2.59

Potlatch currently has a consensus target price of $50.00, suggesting a potential upside of 21.01%. Trex has a consensus target price of $74.88, suggesting a potential upside of 17.80%. Given Potlatch’s stronger consensus rating and higher possible upside, analysts plainly believe Potlatch is more favorable than Trex.

Summary

Trex beats Potlatch on 10 of the 14 factors compared between the two stocks.

About Potlatch

PotlatchDeltic Corporation (Nasdaq: PCH) is a leading Real Estate Investment Trust (REIT) that owns nearly 2.2 million acres of timberlands in Alabama, Arkansas, Georgia, Idaho, Louisiana, Mississippi and South Carolina. Through its taxable REIT subsidiary, the company also operates six sawmills, an industrial-grade plywood mill, a residential and commercial real estate development business and a rural timberland sales program. PotlatchDeltic, a leader in sustainable forest management, is committed to environmental and social responsibility and to responsible governance.

About Trex

Trex Company, Inc. manufactures and distributes composite decking, railing, and outdoor living products and accessories for residential and commercial markets in the United States. It offers decking products and accessories under the names Trex Transcend, Trex Select, Trex Signature, Trex Transcend Lineage, and Trex Enhance for protection against fading, staining, mold, and scratching; Trex Hideaway, a hidden fastening system; and Trex DeckLighting, a LED dimmable deck lighting for use on posts, floors, and steps. The company also provides Trex Transcend Railing products that are used in Trex decking products and other decking materials; Trex Select Railing products for a simple clean finished look; Trex Enhance Railing system; Trex Signature aluminum railing for a contemporary look; and Trex Select T-Rail railing products. In addition, it offers Trex Seclusions, a fencing product that includes structural posts, bottom and top rails, pickets, and decorative post caps. Further, the company acts as a licensor in various licensing agreements with third parties to manufacture and sell products under the Trex name, including Trex Outdoor Furniture; Trex RainEscape, an above joist deck drainage system; Trex Pergola, a cellular PVC product; Trex Latticeworks outdoor lattice boards; Trex Cornhole boards; Diablo Trex Blade, a saw blade for wood-alternative composite decking; Trex SpiralStairs and structural steel posts; and Trex Outdoor Kitchens, cabinetry, and Storage products. It sells its products through wholesale distributors, retail lumber dealers, and Home Depot and Lowe’s stores. Trex Company, Inc. was founded in 1996 and is headquartered in Winchester, Virginia.