Builders FirstSource (NASDAQ: BLDR) and Masco Corporation (NYSE:MAS) are both retail/wholesale companies, but which is the better investment? We will contrast the two businesses based on the strength of their profitabiliy, earnings, analyst recommendations, valuation, institutional ownership, dividends and risk.

Analyst Recommendations

This is a breakdown of recent recommendations for Builders FirstSource and Masco Corporation, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Builders FirstSource 0 3 3 0 2.50
Masco Corporation 0 2 16 0 2.89

Builders FirstSource currently has a consensus target price of $17.00, indicating a potential upside of 11.04%. Masco Corporation has a consensus target price of $39.63, indicating a potential upside of 3.89%. Given Builders FirstSource’s higher possible upside, equities research analysts plainly believe Builders FirstSource is more favorable than Masco Corporation.

Dividends

Masco Corporation pays an annual dividend of $0.40 per share and has a dividend yield of 1.0%. Builders FirstSource does not pay a dividend. Masco Corporation pays out 25.3% of its earnings in the form of a dividend. Builders FirstSource has raised its dividend for 3 consecutive years.

Valuation and Earnings

This table compares Builders FirstSource and Masco Corporation’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Builders FirstSource $6.50 billion 0.26 $361.71 million $1.45 10.56
Masco Corporation $7.41 billion 1.63 $1.20 billion $1.58 24.14

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

Risk & Volatility

Builders FirstSource has a beta of 2.23, meaning that its share price is 123% more volatile than the S&P 500. Comparatively, Masco Corporation has a beta of 1.58, meaning that its share price is 58% more volatile than the S&P 500.

Profitability

This table compares Builders FirstSource and Masco Corporation’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Builders FirstSource 2.54% 48.88% 4.52%
Masco Corporation 7.04% 19,054.54% 9.99%

Institutional & Insider Ownership

85.8% of Builders FirstSource shares are held by institutional investors. Comparatively, 89.4% of Masco Corporation shares are held by institutional investors. 14.6% of Builders FirstSource shares are held by insiders. Comparatively, 1.3% of Masco Corporation shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Summary

Masco Corporation beats Builders FirstSource on 12 of the 17 factors compared between the two stocks.

Builders FirstSource Company Profile

Builders FirstSource, Inc. is a supplier and manufacturer of building materials, manufactured components and construction services to professional contractors, sub-contractors, remodelers and consumers. The Company’s operating segments include Northeast, Southeast, South and West. As of December 31, 2016, it operated at 400 locations in 40 states across the United States. It offers an integrated solution to its customers providing manufacturing, supply and installation of a range of structural and related building products. Its manufactured products include factory-built roof and floor trusses, wall panels and stairs, vinyl windows, custom millwork and trim, as well as engineered wood that it designs, cuts and assembles for each home. It assembles interior and exterior doors into pre-hung units. Additionally, it supplies customers with offering of professional grade building products, such as dimensional lumber and lumber sheet goods, and various window, door and millwork lines.

Masco Corporation Company Profile

Masco Corporation designs, manufactures, markets and distributes branded home improvement and building products. The Company operates through four business segments: Plumbing Products, Decorative Architectural Products, Cabinetry Products, and Windows and Other Specialty Products. The Company’s portfolio of brands includes BEHR paint; DELTA and HANSGROHE faucets, bath and shower fixtures; KRAFTMAID and MERILLAT cabinets; MILGARD windows and doors, and HOT SPRING spas. The Company’s plumbing products include faucets, showerheads, handheld showers, valves, bathing units, shower enclosures and toilets and are sold to home center retailers and to wholesalers and distributors. It also produces architectural coatings, including paints, primers, specialty paints, stains and waterproofing products. In North America, it manufactures and sells value-priced, stock and semi-custom assembled cabinetry for kitchen, bath, storage, home office and home entertainment applications.

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