Critical Analysis: TopBuild Corp. (BLD) versus Installed Building Products (IBP)

TopBuild Corp. (NYSE: BLD) and Installed Building Products (NYSE:IBP) are both mid-cap construction companies, but which is the superior investment? We will contrast the two businesses based on the strength of their analyst recommendations, institutional ownership, profitability, valuation, dividends, earnings and risk.

Volatility & Risk

TopBuild Corp. has a beta of 0.64, meaning that its share price is 36% less volatile than the S&P 500. Comparatively, Installed Building Products has a beta of 0.83, meaning that its share price is 17% less volatile than the S&P 500.

Analyst Recommendations

This is a summary of recent ratings and price targets for TopBuild Corp. and Installed Building Products, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
TopBuild Corp. 0 3 3 0 2.50
Installed Building Products 0 1 4 0 2.80

TopBuild Corp. currently has a consensus price target of $56.20, indicating a potential downside of 14.84%. Installed Building Products has a consensus price target of $66.25, indicating a potential downside of 4.95%. Given Installed Building Products’ stronger consensus rating and higher probable upside, analysts plainly believe Installed Building Products is more favorable than TopBuild Corp..

Earnings & Valuation

This table compares TopBuild Corp. and Installed Building Products’ revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
TopBuild Corp. $1.81 billion 1.33 $158.32 million $1.80 36.66
Installed Building Products $997.23 million 2.23 $121.83 million $1.30 53.62

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

Profitability

This table compares TopBuild Corp. and Installed Building Products’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
TopBuild Corp. 3.73% 9.09% 5.14%
Installed Building Products 4.11% 25.27% 7.46%

Insider & Institutional Ownership

91.8% of TopBuild Corp. shares are owned by institutional investors. Comparatively, 65.5% of Installed Building Products shares are owned by institutional investors. 1.3% of TopBuild Corp. shares are owned by insiders. Comparatively, 32.9% of Installed Building Products shares are owned by 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.

Summary

Installed Building Products beats TopBuild Corp. on 10 of the 14 factors compared between the two stocks.

About TopBuild Corp.

TopBuild Corp. installs and distributes insulation products to the United States construction industry. The Company operates through two segments: Installation (TruTeam) and Distribution (Service Partners). Its Installation segment principally includes the sales and installation of insulation and other building products. Its Distribution segment includes the distribution of insulation and other building products. As of December 31, 2016, the Company provided insulation installation services through its TruTeam contractor services business, which had over 175 installation branches located in 41 states. It installs various insulation applications, which include fiberglass batts and rolls and blown-in loose fill fiberglass. As of December 31, 2016, the Company distributed insulation and other building products, including rain gutters, fireplaces, closet shelving, and roofing materials through its Service Partners business, which had over 70 distribution centers located in 33 states.

About Installed Building Products

Installed Building Products, Inc. is a holding company. The Company is a residential insulation installer in the United States. As of December 31, 2016, the Company’s national platform included over 100 locations accessing customers in 48 continental states and the District of Columbia. The Company also installs complementary building products, including garage doors, rain gutters, shower doors, closet shelving and mirrors, which provides cross-selling opportunities to supplement the insulation installation business. The Company manages various aspects of the installation process for the customers, from the direct purchase and receipt of materials from national manufacturers, to supply of materials to job sites and quality installation. The Company’s customers include production and custom homebuilders, multi-family and commercial contractors, and homeowners.

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