Head to Head Analysis: Builders FirstSource (BLDR) vs. Fortune Brands Home & Security (FBHS)

Builders FirstSource (NASDAQ: BLDR) and Fortune Brands Home & Security (NYSE:FBHS) are both retail/wholesale companies, but which is the superior investment? We will compare the two businesses based on the strength of their institutional ownership, dividends, risk, valuation, analyst recommendations, profitability and earnings.

Analyst Recommendations

This is a summary of recent recommendations for Builders FirstSource and Fortune Brands Home & Security, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Builders FirstSource	0	2	4	0	2.67
Fortune Brands Home & Security	0	7	9	0	2.56

Builders FirstSource currently has a consensus price target of $17.33, indicating a potential upside of 18.80%. Fortune Brands Home & Security has a consensus price target of $67.92, indicating a potential upside of 8.94%. Given Builders FirstSource’s stronger consensus rating and higher possible upside, equities analysts clearly believe Builders FirstSource is more favorable than Fortune Brands Home & Security.

Valuation and Earnings

This table compares Builders FirstSource and Fortune Brands Home & Security’s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	EBITDA	Earnings Per Share	Price/Earnings Ratio
Builders FirstSource	$6.67 billion	0.25	$367.24 million	$1.52	9.60
Fortune Brands Home & Security	$5.13 billion	1.87	$822.40 million	$2.84	21.95

Fortune Brands Home & Security has higher revenue, but lower earnings than Builders FirstSource. Builders FirstSource is trading at a lower price-to-earnings ratio than Fortune Brands Home & Security, indicating that it is currently the more affordable of the two stocks.

Volatility and Risk

Builders FirstSource has a beta of 2.16, meaning that its share price is 116% more volatile than the S&P 500. Comparatively, Fortune Brands Home & Security has a beta of 1.39, meaning that its share price is 39% more volatile than the S&P 500.

Institutional & Insider Ownership

85.2% of Builders FirstSource shares are owned by institutional investors. Comparatively, 85.7% of Fortune Brands Home & Security shares are owned by institutional investors. 14.6% of Builders FirstSource shares are owned by company insiders. Comparatively, 1.6% of Fortune Brands Home & Security shares are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Dividends

Fortune Brands Home & Security pays an annual dividend of $0.72 per share and has a dividend yield of 1.2%. Builders FirstSource does not pay a dividend. Fortune Brands Home & Security pays out 25.4% of its earnings in the form of a dividend. Fortune Brands Home & Security has increased its dividend for 3 consecutive years.

Profitability

This table compares Builders FirstSource and Fortune Brands Home & Security’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Builders FirstSource	2.60%	43.83%	4.71%
Fortune Brands Home & Security	8.61%	18.93%	8.88%

Summary

Fortune Brands Home & Security beats Builders FirstSource on 10 of the 17 factors compared between the two stocks.

Builders FirstSource Company Profile

Builders FirstSource, Inc. is a supplier and manufacturer of building materials, manufactured components and construction services to professional contractors, sub-contractors, remodelers and consumers. The Company’s operating segments include Northeast, Southeast, South and West. As of December 31, 2016, it operated at 400 locations in 40 states across the United States. It offers an integrated solution to its customers providing manufacturing, supply and installation of a range of structural and related building products. Its manufactured products include factory-built roof and floor trusses, wall panels and stairs, vinyl windows, custom millwork and trim, as well as engineered wood that it designs, cuts and assembles for each home. It assembles interior and exterior doors into pre-hung units. Additionally, it supplies customers with offering of professional grade building products, such as dimensional lumber and lumber sheet goods, and various window, door and millwork lines.

Fortune Brands Home & Security Company Profile

Fortune Brands Home & Security, Inc. is a holding company. The Company operates through four segments. The Cabinets segment includes custom, semi-custom and stock cabinetry for the kitchen, bath and other parts of the home under brand names, including Aristokraft, Mid-Continent, Diamond, Kitchen Classics, Kitchen Craft, Schrock, Omega, Homecrest, Thomasville, StarMark and Ultracraft. The Plumbing segment manufactures or assembles and sells faucets, bath furnishings, accessories and kitchen sinks and waste disposals under the Moen, Riobel, ROHL, Perrin & Rowe, and Waste King brands. The Doors segment includes residential fiberglass and steel entry door systems under the Therma-Tru brand name and urethane millwork product lines under the Fypon brand name. The Security segment includes locks, safety and security devices and electronic security products under the Master Lock brand name and fire resistant safes, security containers and commercial cabinets under the SentrySafe brand name.