USG Corporation (NYSE: USG) and Armstrong World Industries (NYSE:AWI) are both mid-cap construction companies, but which is the superior investment? We will compare the two businesses based on the strength of their valuation, profitabiliy, institutional ownership, earnings, risk, dividends and analyst recommendations.

Risk and Volatility

USG Corporation has a beta of 1.08, suggesting that its share price is 8% more volatile than the S&P 500. Comparatively, Armstrong World Industries has a beta of 1.65, suggesting that its share price is 65% more volatile than the S&P 500.

Insider and Institutional Ownership

90.0% of USG Corporation shares are owned by institutional investors. 0.7% of USG Corporation shares are owned by company insiders. Comparatively, 1.7% of Armstrong World Industries shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Earnings & Valuation

This table compares USG Corporation and Armstrong World Industries’ top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
USG Corporation $3.08 billion 1.26 $487.00 million $3.10 8.76
Armstrong World Industries $1.28 billion 1.96 $255.10 million $3.08 15.37

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

Profitability

This table compares USG Corporation and Armstrong World Industries’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
USG Corporation 14.94% 13.57% 6.20%
Armstrong World Industries 13.24% 49.73% 7.74%

Analyst Recommendations

This is a summary of current ratings and price targets for USG Corporation and Armstrong World Industries, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
USG Corporation 2 11 5 0 2.17
Armstrong World Industries 1 3 4 0 2.38

USG Corporation presently has a consensus price target of $31.00, suggesting a potential upside of 14.18%. Armstrong World Industries has a consensus price target of $44.83, suggesting a potential downside of 5.32%. Given USG Corporation’s higher probable upside, equities analysts plainly believe USG Corporation is more favorable than Armstrong World Industries.

About USG Corporation

USG Corporation, through its subsidiaries, is a manufacturer and distributor of building materials. The Company’s segments include Gypsum, Ceilings and USG Boral Building Products (UBBP). It produces a range of products for use in new residential, new nonresidential, and residential and nonresidential repair and remodel construction, as well as products used in certain industrial processes. Its products are distributed through building materials dealers, home improvement centers and other retailers, specialty wallboard distributors, and contractors. Gypsum segment manufactures and markets gypsum and related products in the United States, Canada, Mexico and Latin America. Ceilings segment manufactures and markets interior systems products in the United States, Canada, Mexico and Latin America. The UBBP segment manufactures, distributes and sells certain building products, mines raw gypsum and sells natural and synthetic gypsum throughout Asia, Australasia and the Middle East.

About Armstrong World Industries

Armstrong World Industries, Inc. (AWI) is a global producer of ceiling systems. The Company owns and operates the Building Products (Ceilings) segment. The Company designs, manufactures and sells ceiling systems (primarily mineral fiber, fiberglass wool and metal) around the world. Its products are used in commercial and institutional buildings. Its geographical segments include Americas (including Canada); Europe, Middle East and Africa (including Russia) (EMEA), and Pacific Rim. As of December 31, 2016, it had 15 manufacturing plants in eight countries, including six plants located throughout the United States. Its Americas segment sells products for use in single and multi-family housing. It sells commercial products to building materials distributors re-selling its products to contractors, subcontractors’ alliances, architect and design firms, and facility owners. Residential ceiling products are sold in the Americas primarily to wholesalers and retailers.

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