Critical Review: Summit Materials (SUM) vs. USG Corporation (USG)

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

Risk & Volatility

Summit Materials has a beta of 2.06, meaning that its stock price is 106% more volatile than the S&P 500. Comparatively, USG Corporation has a beta of 1.08, meaning that its stock price is 8% more volatile than the S&P 500.

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%

Insider and Institutional Ownership

89.3% 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 hedge funds, large money managers and endowments believe a stock will outperform the market over the long term.

Analyst Ratings

This is a breakdown of current ratings and price targets for Summit Materials and USG Corporation, as provided 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	5	0	2.18

Summit Materials presently has a consensus target price of $30.33, suggesting a potential upside of 11.85%. USG Corporation has a consensus target price of $30.93, suggesting a potential upside of 15.66%. Given USG Corporation’s higher possible upside, analysts plainly believe USG Corporation is more favorable than Summit Materials.

Valuation & Earnings

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

	Gross Revenue	Price/Sales Ratio	EBITDA	Earnings Per Share	Price/Earnings Ratio
Summit Materials	$1.76 billion	1.66	$368.45 million	$0.56	48.19
USG Corporation	$3.08 billion	1.25	$487.00 million	$3.10	8.63

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.

Summary

USG Corporation beats Summit Materials on 8 of the 14 factors compared between the two stocks.

Summit Materials Company Profile

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.

USG Corporation Company Profile

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.