Critical Analysis: Summit Materials (SUM) and USG Corporation (USG)

Summit Materials (NYSE: SUM) and USG Corporation (NYSE:USG) are both mid-cap construction companies, but which is the superior stock? We will compare the two businesses based on the strength of their risk, valuation, institutional ownership, earnings, profitability, dividends and analyst recommendations.

Profitability

This table compares Summit Materials and USG Corporation’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Summit Materials 2.46% 9.90% 3.22%
USG Corporation 14.94% 13.57% 6.20%

Earnings and Valuation

This table compares Summit Materials and USG Corporation’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Summit Materials $1.76 billion 1.80 $368.45 million $0.56 52.28
USG Corporation $3.08 billion 1.41 $487.00 million $3.10 9.80

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

Institutional & Insider Ownership

87.0% of USG Corporation shares are held by institutional investors. 2.0% of Summit Materials shares are held by insiders. Comparatively, 0.7% of USG Corporation shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company will outperform the market over the long term.

Volatility and Risk

Summit Materials has a beta of 2.05, suggesting that its stock price is 105% more volatile than the S&P 500. Comparatively, USG Corporation has a beta of 1, suggesting that its stock price has a similar volatility profile to the S&P 500.

Analyst Ratings

This is a breakdown of recent ratings and price targets for Summit Materials and USG Corporation, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Summit Materials 0 2 6 0 2.75
USG Corporation 2 10 3 0 2.07

Summit Materials currently has a consensus target price of $30.33, indicating a potential upside of 3.10%. USG Corporation has a consensus target price of $30.46, indicating a potential upside of 0.27%. Given Summit Materials’ stronger consensus rating and higher probable upside, research analysts clearly believe Summit Materials is more favorable than USG Corporation.

About Summit Materials

Summit Materials, Inc. is a construction materials company. The Company operates through three segments: West, East and Cement. As of December 31, 2016, the Company had operations in 21 states in the United States and in British Columbia, Canada. The Company’s materials include aggregates, which it supplies across the United States, and in British Columbia, Canada, and cement, which it supplies along the Mississippi River from Minneapolis to New Orleans. Within its markets, it offers construction materials and related downstream products through its vertical integration. In addition to supplying of aggregates to its customers, the Company also uses its materials internally to produce ready-mix concrete and asphalt paving mix. Its construction materials operations consists of aggregates production, including crushed stone and construction sand and gravel, cement and ready-mixed concrete production, and asphalt paving mix production.

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.

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