Contrasting Advanced Drainage Systems (NYSE:WMS) & Simpson Manufacturing (NYSE:SSD)

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

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Simpson Manufacturing	14.90%	18.11%	11.90%
Advanced Drainage Systems	15.35%	28.85%	12.36%

Valuation and Earnings

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

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Simpson Manufacturing	$2.23 billion	3.15	$322.22 million	$8.21	20.63
Advanced Drainage Systems	$2.90 billion	4.01	$450.17 million	$5.86	25.55

Advanced Drainage Systems has higher revenue and earnings than Simpson Manufacturing. Simpson Manufacturing 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.

Insider and Institutional Ownership

93.7% of Simpson Manufacturing shares are owned by institutional investors. Comparatively, 89.8% of Advanced Drainage Systems shares are owned by institutional investors. 0.4% of Simpson Manufacturing shares are owned by company insiders. Comparatively, 1.6% of Advanced Drainage Systems shares are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.

Dividends

Simpson Manufacturing pays an annual dividend of $1.16 per share and has a dividend yield of 0.7%. Advanced Drainage Systems pays an annual dividend of $0.72 per share and has a dividend yield of 0.5%. Simpson Manufacturing pays out 14.1% of its earnings in the form of a dividend. Advanced Drainage Systems pays out 12.3% 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. Simpson Manufacturing has raised its dividend for 11 consecutive years and Advanced Drainage Systems has raised its dividend for 1 consecutive years. Simpson Manufacturing is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Ratings

This is a summary of recent recommendations for Simpson Manufacturing and Advanced Drainage Systems, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Simpson Manufacturing	0	2	1	0	2.33
Advanced Drainage Systems	0	2	8	0	2.80

Simpson Manufacturing currently has a consensus target price of $201.00, indicating a potential upside of 18.66%. Advanced Drainage Systems has a consensus target price of $157.11, indicating a potential upside of 4.95%. Given Simpson Manufacturing’s higher possible upside, equities research analysts clearly believe Simpson Manufacturing is more favorable than Advanced Drainage Systems.

Volatility and Risk

Simpson Manufacturing has a beta of 1.36, meaning that its stock price is 36% more volatile than the S&P 500. Comparatively, Advanced Drainage Systems has a beta of 1.36, meaning that its stock price is 36% more volatile than the S&P 500.

Summary

Advanced Drainage Systems beats Simpson Manufacturing on 11 of the 16 factors compared between the two stocks.

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.

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.