Critical Review: Summit Materials (NYSE:SUM) & Armstrong World Industries (AWI)

Summit Materials (NYSE: SUM) and Armstrong World Industries (NYSE:AWI) are both mid-cap construction companies, but which is the superior investment? We will contrast the two companies based on the strength of their risk, earnings, valuation, analyst recommendations, institutional ownership, profitabiliy and dividends.

Profitability

This table compares Summit Materials and Armstrong World Industries’ 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%
Armstrong World Industries 13.24% 49.73% 7.74%

Analyst Ratings

This is a summary of current recommendations and price targets for Summit Materials and Armstrong World Industries, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Summit Materials 0 2 6 0 2.75
Armstrong World Industries 1 3 4 0 2.38

Summit Materials presently has a consensus target price of $30.33, indicating a potential upside of 3.42%. Armstrong World Industries has a consensus target price of $44.83, indicating a potential downside of 3.48%. Given Summit Materials’ stronger consensus rating and higher probable upside, equities analysts clearly believe Summit Materials is more favorable than Armstrong World Industries.

Valuation & Earnings

This table compares Summit Materials and Armstrong World Industries’ revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Summit Materials $1.76 billion 1.79 $368.45 million $0.56 52.12
Armstrong World Industries $1.28 billion 1.92 $255.10 million $3.08 15.08

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

Volatility & Risk

Summit Materials has a beta of 2.06, indicating that its share price is 106% more volatile than the S&P 500. Comparatively, Armstrong World Industries has a beta of 1.65, indicating that its share price is 65% more volatile than the S&P 500.

Summary

Summit Materials beats Armstrong World Industries on 7 of the 12 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.

Armstrong World Industries Company Profile

Armstrong World Industries, Inc. (AWI) is a global producer of ceiling systems. The Company owns and operates the Building Products (Ceilings) segment. The Company designs, manufactures and sells ceiling systems (primarily mineral fiber, fiberglass wool and metal) around the world. Its products are used in commercial and institutional buildings. Its geographical segments include Americas (including Canada); Europe, Middle East and Africa (including Russia) (EMEA), and Pacific Rim. As of December 31, 2016, it had 15 manufacturing plants in eight countries, including six plants located throughout the United States. Its Americas segment sells products for use in single and multi-family housing. It sells commercial products to building materials distributors re-selling its products to contractors, subcontractors’ alliances, architect and design firms, and facility owners. Residential ceiling products are sold in the Americas primarily to wholesalers and retailers.

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