Financial Analysis: United Rentals (NYSE:URI) and Quanex Building Products (NYSE:NX)

Quanex Building Products (NYSE:NX) and United Rentals (NYSE:URI) are both construction companies, but which is the superior business? We will contrast the two companies based on the strength of their analyst recommendations, risk, profitability, earnings, institutional ownership, valuation and dividends.

Risk and Volatility

Quanex Building Products has a beta of 0.98, meaning that its share price is 2% less volatile than the S&P 500. Comparatively, United Rentals has a beta of 1.73, meaning that its share price is 73% more volatile than the S&P 500.

Valuation and Earnings

This table compares Quanex Building Products and United Rentals”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Quanex Building Products	$1.28 billion	0.51	$33.06 million	($6.22)	-2.30
United Rentals	$15.35 billion	4.22	$2.58 billion	$38.67	26.00

United Rentals has higher revenue and earnings than Quanex Building Products. Quanex Building Products is trading at a lower price-to-earnings ratio than United Rentals, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a breakdown of recent ratings and target prices for Quanex Building Products and United Rentals, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Quanex Building Products	2	0	0	0	1.00
United Rentals	1	5	11	2	2.74

United Rentals has a consensus price target of $956.13, suggesting a potential downside of 4.92%. Given United Rentals’ stronger consensus rating and higher probable upside, analysts plainly believe United Rentals is more favorable than Quanex Building Products.

Dividends

Quanex Building Products pays an annual dividend of $0.32 per share and has a dividend yield of 2.2%. United Rentals pays an annual dividend of $7.16 per share and has a dividend yield of 0.7%. Quanex Building Products pays out -5.1% of its earnings in the form of a dividend. United Rentals pays out 18.5% 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. United Rentals has raised its dividend for 3 consecutive years. Quanex Building Products is clearly the better dividend stock, given its higher yield and lower payout ratio.

Insider & Institutional Ownership

97.5% of Quanex Building Products shares are owned by institutional investors. Comparatively, 96.3% of United Rentals shares are owned by institutional investors. 2.2% of Quanex Building Products shares are owned by company insiders. Comparatively, 0.5% of United Rentals shares are owned 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.

Profitability

This table compares Quanex Building Products and United Rentals’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Quanex Building Products	-15.45%	10.48%	4.40%
United Rentals	16.11%	32.01%	9.85%

Summary

United Rentals beats Quanex Building Products on 14 of the 18 factors compared between the two stocks.

About Quanex Building Products

Quanex Building Products Corporation, together with its subsidiaries, provides components for the fenestration industry in the United States, rest of Europe, Canada, Asia, the United Kingdom, and internationally. The company operates through three segments: North American Fenestration, European Fenestration, and North American Cabinet Components. It offers flexible insulating glass spacers, extruded vinyl profiles, window and door screens, and precision-formed metal and wood products, as well as cabinet doors and other components for original equipment manufacturers (OEMs) in the kitchen and bathroom cabinet industry. In addition, the company provides various non-fenestration components and products, including solar panel sealants, trim moldings, vinyl decking, fencing, water retention barriers, and conservatory roof components. It sells its products to OEMs in the building products industry through sales representatives, direct sales force, distributors, and independent sales agents. Quanex Building Products Corporation was founded in 1927 and is based in Houston, Texas.

About United Rentals

United Rentals, Inc., through its subsidiaries, operates as an equipment rental company. It operates in two segments, General Rentals and Specialty. The General Rentals segment rents general construction and industrial equipment includes backhoes, skid-steer loaders, forklifts, earthmoving equipment, and material handling equipment; aerial work platforms, such as boom and scissor lifts; and general tools and light equipment comprising pressure washers, water pumps, and power tools for construction and industrial companies, manufacturers, utilities, municipalities, homeowners, and government entities. The specialty segment rents specialty construction products, including trench safety equipment consists of trench shields, aluminum hydraulic shoring systems, slide rails, crossing plates, construction lasers, and line testing equipment for underground work; power and heating, ventilating, and air conditioning equipment, such as portable diesel generators, electrical distribution equipment, and temperature control equipment; fluid solutions equipment for fluid containment, transfer, and treatment; and mobile storage equipment and modular office space. This segment serves construction companies involved in infrastructure projects, and municipalities and industrial companies. It also sells aerial lifts, reach forklifts, telehandlers, compressors, and generators; construction consumables, tools, small equipment, and safety supplies; and parts for equipment that is owned by its customers, as well as provides repair and maintenance services. The company sells used equipment through its sales force, brokers, website, at auctions, and directly to manufacturers. The company operates in the United States, Canada, Europe, Australia, and New Zealand. United Rentals, Inc. was incorporated in 1997 and is headquartered in Stamford, Connecticut.