Arcosa (NYSE:ACA) vs. Advanced Drainage Systems (NYSE:WMS) Critical Comparison

Advanced Drainage Systems (NYSE:WMS) and Arcosa (NYSE:ACA) are both construction companies, but which is the better business? We will contrast the two companies based on the strength of their profitability, valuation, analyst recommendations, risk, earnings, dividends and institutional ownership.

Valuation and Earnings

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

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Advanced Drainage Systems	$2.90 billion	3.64	$450.17 million	$5.54	24.52
Arcosa	$2.57 billion	1.75	$93.70 million	$1.88	48.73

Advanced Drainage Systems has higher revenue and earnings than Arcosa. Advanced Drainage Systems is trading at a lower price-to-earnings ratio than Arcosa, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a breakdown of recent ratings and recommmendations for Advanced Drainage Systems and Arcosa, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Advanced Drainage Systems	0	1	7	0	2.88
Arcosa	0	0	3	0	3.00

Advanced Drainage Systems currently has a consensus target price of $152.56, suggesting a potential upside of 12.29%. Arcosa has a consensus target price of $112.00, suggesting a potential upside of 22.25%. Given Arcosa’s stronger consensus rating and higher probable upside, analysts plainly believe Arcosa is more favorable than Advanced Drainage Systems.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Advanced Drainage Systems	14.82%	29.57%	12.23%
Arcosa	3.45%	6.25%	3.19%

Insider and Institutional Ownership

89.8% of Advanced Drainage Systems shares are held by institutional investors. Comparatively, 90.7% of Arcosa shares are held by institutional investors. 1.6% of Advanced Drainage Systems shares are held by company insiders. Comparatively, 2.0% of Arcosa shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Dividends

Advanced Drainage Systems pays an annual dividend of $0.72 per share and has a dividend yield of 0.5%. Arcosa pays an annual dividend of $0.20 per share and has a dividend yield of 0.2%. Advanced Drainage Systems pays out 13.0% of its earnings in the form of a dividend. Arcosa pays out 10.6% 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. Advanced Drainage Systems has raised its dividend for 1 consecutive years. Advanced Drainage Systems is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Volatility & Risk

Advanced Drainage Systems has a beta of 1.26, indicating that its share price is 26% more volatile than the S&P 500. Comparatively, Arcosa has a beta of 1, indicating that its share price has a similar volatility profile to the S&P 500.

Summary

Advanced Drainage Systems beats Arcosa on 11 of the 17 factors compared between the two stocks.

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.

About Arcosa

Arcosa, Inc., together with its subsidiaries, provides infrastructure-related products and solutions for the construction, engineered structures, and transportation markets in the United States. It operates through three segments: Construction Products, Engineered Structures, and Transportation Products. The Construction Products segment offers natural and recycled aggregates; specialty materials; and construction site support equipment, including trench shields and shoring products for residential and non-residential construction, and specialty/other products, as well as for infrastructure construction. The Engineered Structures segment offers utility structures, wind towers, traffic structures, and telecommunication structures for electricity transmission and distribution, wind power generation, highway road construction, and wireless communication markets. The Transportation Products segment offers inland barges, fiberglass barge covers, winches, marine hardware, and steel components for railcars and transportation equipment; cast components for industrial and mining sectors; and axles, circular forgings, and coupling devices for freight, tank, locomotive, and passenger rail transportation equipment, as well as other industrial uses. Arcosa, Inc. was incorporated in 2018 and is headquartered in Dallas, Texas.