Masco (NYSE:MAS) versus Advanced Drainage Systems (NYSE:WMS) Critical Analysis

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

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Advanced Drainage Systems	15.75%	27.72%	12.31%
Masco	10.90%	815.20%	16.32%

Volatility & Risk

Advanced Drainage Systems has a beta of 1.37, suggesting that its stock price is 37% more volatile than the S&P 500. Comparatively, Masco has a beta of 1.29, suggesting that its stock price is 29% more volatile than the S&P 500.

Valuation and Earnings

This table compares Advanced Drainage Systems and Masco”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Advanced Drainage Systems	$2.90 billion	4.07	$450.17 million	$6.01	25.25
Masco	$7.56 billion	1.98	$810.00 million	$3.85	19.29

Masco has higher revenue and earnings than Advanced Drainage Systems. Masco 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.

Dividends

Advanced Drainage Systems pays an annual dividend of $0.72 per share and has a dividend yield of 0.5%. Masco pays an annual dividend of $1.28 per share and has a dividend yield of 1.7%. Advanced Drainage Systems pays out 12.0% of its earnings in the form of a dividend. Masco pays out 33.2% 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. Advanced Drainage Systems has increased its dividend for 1 consecutive years and Masco has increased its dividend for 12 consecutive years. Masco is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Recommendations

This is a summary of current ratings and price targets for Advanced Drainage Systems and Masco, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Advanced Drainage Systems	0	1	7	0	2.88
Masco	1	12	7	0	2.30

Advanced Drainage Systems currently has a consensus price target of $190.29, indicating a potential upside of 25.37%. Masco has a consensus price target of $80.07, indicating a potential upside of 7.81%. Given Advanced Drainage Systems’ stronger consensus rating and higher possible upside, equities analysts clearly believe Advanced Drainage Systems is more favorable than Masco.

Insider and Institutional Ownership

89.8% of Advanced Drainage Systems shares are held by institutional investors. Comparatively, 93.9% of Masco shares are held by institutional investors. 1.6% of Advanced Drainage Systems shares are held by company insiders. Comparatively, 0.6% of Masco shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Summary

Advanced Drainage Systems beats Masco on 9 of the 16 factors compared between the two stocks.

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.

About Masco

Masco Corporation designs, manufactures, and distributes home improvement and building products in North America, Europe, and internationally. The company's Plumbing Products segment offers faucets, showerheads, handheld showers, valves, bath hardware and accessories, bathing units, shower bases and enclosures, sinks, toilets, acrylic tubs, shower trays, spas, exercise pools, and fitness systems; brass, copper, and composite plumbing system components; connected water products; thermoplastic solutions, extruded plastic profiles, specialized fabrications, and PEX tubing products; and other non-decorative plumbing products. This segment provides its products under the DELTA, BRIZO, PEERLESS, HANSGROHE, AXOR, KRAUS, EASY DRAIN, STEAMIST, ELITESTEAM, GINGER, NEWPORT BRASS, BRASSTECH, WALTEC, BRISTAN, HERITAGE, MIROLIN, HOT SPRING, CALDERA, FREEFLOW SPAS, FANTASY SPAS, ENDLESS POOLS, BRASSCRAFT, PLUMB SHOP, COBRA, COBRA PRO, and MASTER PLUMBER brands. Its Decorative Architectural Products segment offers paints, primers, specialty coatings, stains, and waterproofing products, as well as paint applicators and accessories; cabinet and door hardware, functional hardware, wall plates, hook and rail products, closet organization systems, and picture hanging accessories; decorative bath hardware, mirrors, and shower accessories and doors; and decorative indoor and outdoor lighting fixtures, ceiling fans, landscape lighting, and LED lighting systems. This segment provides its products under the BEHR, KILZ, WHIZZ, Elder & Jenks, LIBERTY, BRAINERD, FRANKLIN BRASS, KICHLER, and ÉLAN brands. It sells its products to the plumbing, heating, and hardware wholesalers; home centers and online retailers; hardware stores; electrical and landscape distributors; lighting showrooms; building supply outlets; and other mass merchandisers. Masco Corporation was incorporated in 1929 and is headquartered in Livonia, Michigan.