Critical Analysis: TopBuild (NYSE:BLD) & Simpson Manufacturing (NYSE:SSD)

TopBuild (NYSE:BLD) and Simpson Manufacturing (NYSE:SSD) are both construction companies, but which is the better investment? We will contrast the two businesses based on the strength of their profitability, analyst recommendations, earnings, institutional ownership, dividends, valuation and risk.

Profitability

This table compares TopBuild and Simpson Manufacturing’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
TopBuild	11.40%	28.32%	12.73%
Simpson Manufacturing	14.53%	17.72%	11.57%

Analyst Recommendations

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

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
TopBuild	0	4	8	1	2.77
Simpson Manufacturing	0	1	1	0	2.50

TopBuild currently has a consensus target price of $394.67, suggesting a potential upside of 0.23%. Simpson Manufacturing has a consensus target price of $188.50, suggesting a potential upside of 6.70%. Given Simpson Manufacturing’s higher probable upside, analysts clearly believe Simpson Manufacturing is more favorable than TopBuild.

Institutional and Insider Ownership

95.7% of TopBuild shares are held by institutional investors. Comparatively, 93.7% of Simpson Manufacturing shares are held by institutional investors. 0.4% of TopBuild shares are held by insiders. Comparatively, 0.4% of Simpson Manufacturing shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company will outperform the market over the long term.

Volatility & Risk

TopBuild has a beta of 1.61, indicating that its stock price is 61% more volatile than the S&P 500. Comparatively, Simpson Manufacturing has a beta of 1.3, indicating that its stock price is 30% more volatile than the S&P 500.

Earnings & Valuation

This table compares TopBuild and Simpson Manufacturing”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
TopBuild	$5.33 billion	2.08	$622.60 million	$20.31	19.39
Simpson Manufacturing	$2.23 billion	3.29	$322.22 million	$7.84	22.53

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

Summary

TopBuild beats Simpson Manufacturing on 11 of the 15 factors compared between the two stocks.

About TopBuild

TopBuild Corp., together with its subsidiaries, engages in the installation and distribution of insulation and other building material products to the construction industry. The company operates in two segments, Installation and Specialty Distribution. It provides insulation products and accessories, glass and windows, rain gutters, garage doors, fireplaces, roofing materials, closet shelving, and other products. The company also offers insulation installation services for fiberglass batts and rolls, blown-in loose fill fiberglass, polyurethane spray foam, and blown-in loose fill cellulose applications. In addition, it distributes building and mechanical insulation, insulation accessories, and other building product materials for the residential, commercial, and industrial end markets. The company serves single-family homebuilders, single-family custom builders, multi-family builders, commercial general contractors, remodelers, and individual homeowners, as well as insulation contractors, gutter contractors, weatherization contractors, other contractors, dealers, metal building erectors, and modular home builders. It operates installation branches and distribution centers in the United States and Canada. The company was formerly known as Masco SpinCo Corp. and changed its name to TopBuild Corp. in March 2015. TopBuild Corp. was incorporated in 2015 and is headquartered in Daytona Beach, Florida.

About Simpson Manufacturing

Simpson Manufacturing Co., Inc., through its subsidiaries, designs, engineers, manufactures, and sells structural solutions for wood, concrete, and steel connections. The company offers wood construction products, including connectors, truss plates, fastening systems, fasteners and shearwalls, and pre-fabricated lateral systems for use in light-frame construction; and concrete construction products comprising adhesives, specialty chemicals, mechanical anchors, carbide drill bits, powder actuated tools, fiber-reinforced materials, and other repair products for use in concrete, masonry, and steel construction, as well as grouts, coatings, sealers, mortars, fiberglass and fiber-reinforced polymer systems, and asphalt products for use in concrete construction repair, and strengthening and protection products. It also provides connectors and lateral products for wood framing, timber and offsite construction, structural steel construction, and cold-formed steel applications; and mechanical and adhesive anchors for concrete and masonry construction applications. In addition, the company offers engineering and design services, as well as software solutions that facilitate the specification, selection, and use of its products. It markets its products to the residential construction, light industrial and commercial construction, infrastructure construction, remodeling, and do-it-yourself markets in the United States, Canada, France, the United Kingdom, Germany, Denmark, Switzerland, Portugal, Poland, the Netherlands, Belgium, Spain, Italy, Romania, Sweden, Norway, Australia, New Zealand, China, Taiwan, and Vietnam. The company was founded in 1956 and is headquartered in Pleasanton, California.