Headwaters (NYSE: HW) and Trex Company (NYSE:TREX) are both construction companies, but which is the superior stock? We will contrast the two businesses based on the strength of their institutional ownership, profitabiliy, dividends, valuation, earnings, risk and analyst recommendations.

Analyst Recommendations

This is a breakdown of current recommendations for Headwaters and Trex Company, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Headwaters 1 8 1 0 2.00
Trex Company 0 3 2 0 2.40

Headwaters currently has a consensus price target of $22.79, suggesting a potential downside of 5.97%. Trex Company has a consensus price target of $67.75, suggesting a potential downside of 0.03%. Given Trex Company’s stronger consensus rating and higher probable upside, analysts plainly believe Trex Company is more favorable than Headwaters.

Valuation & Earnings

This table compares Headwaters and Trex Company’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Headwaters N/A N/A N/A $0.56 43.29
Trex Company $492.75 million 4.04 $123.27 million $2.06 32.90

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

Profitability

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

Net Margins Return on Equity Return on Assets
Headwaters 4.18% 26.48% 6.67%
Trex Company 13.02% 65.45% 29.25%

Risk & Volatility

Headwaters has a beta of 1.7, suggesting that its share price is 70% more volatile than the S&P 500. Comparatively, Trex Company has a beta of 2.33, suggesting that its share price is 133% more volatile than the S&P 500.

Insider and Institutional Ownership

86.8% of Headwaters shares are owned by institutional investors. Comparatively, 92.2% of Trex Company shares are owned by institutional investors. 6.4% of Headwaters shares are owned by insiders. Comparatively, 1.4% of Trex Company shares are owned by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Summary

Trex Company beats Headwaters on 10 of the 11 factors compared between the two stocks.

Headwaters Company Profile

Headwaters Incorporated is a building materials company operating in the building products and construction materials sectors. The Company sells building products, such as manufactured architectural stone, siding accessory products, roof products and concrete block. The Company’s operating segments include building products, construction materials and energy technology. It also markets coal combustion products (CCPs), including fly ash, which is used as a partial replacement for Portland cement in concrete. The Building Products segment is engaged in designing, manufacturing and marketing of siding accessories used in residential repair and remodeling, and new residential construction applications. The Materials segment markets fly ash in the construction materials sector. The Energy Technology segment is involved in heavy oil upgrading processes through the sale of its HCAT catalyst material. It sells catalytic materials to certain refineries engaged in heavy oil upgrading.

Trex Company Company Profile

Trex Company, Inc. is a manufacturer of wood-alternative decking and railing products. The Company’s products are marketed under the brand name Trex and are manufactured in the United States. It offers a set of outdoor living products in the decking, railing, porch, fencing, trim, steel deck framing and outdoor lighting categories. Its decking products include Trex Transcend, Trex Enhance and Trex Select. The Company’s railing products include Trex Transcend Railing, Trex Select Railing and Trex Signature aluminum railing. It offers Trex Transcend Porch Flooring and Railing System, which is an integrated system of porch components and accessories. The Company offers Trex Seclusions fencing product, which consists of structural posts, bottom rail, pickets, top rail and decorative post caps. It offers a triple-coated steel deck framing system called Trex Elevations. The Company also offers outdoor lighting systems, such as Trex DeckLighting and Trex Landscape Lighting.

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