Contrasting Trex (TREX) and Fortune Brands Home & Security (FBHS)

Fortune Brands Home & Security (NYSE: FBHS) and Trex (NYSE:TREX) are both mid-cap industrial products companies, but which is the better investment? We will contrast the two businesses based on the strength of their earnings, institutional ownership, dividends, risk, valuation, profitability and analyst recommendations.

Analyst Recommendations

This is a summary of recent ratings and recommmendations for Fortune Brands Home & Security and Trex, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Fortune Brands Home & Security 0 6 9 0 2.60
Trex 0 3 2 0 2.40

Fortune Brands Home & Security presently has a consensus target price of $68.17, suggesting a potential upside of 5.29%. Trex has a consensus target price of $71.75, suggesting a potential downside of 11.43%. Given Fortune Brands Home & Security’s stronger consensus rating and higher possible upside, equities analysts clearly believe Fortune Brands Home & Security is more favorable than Trex.

Valuation and Earnings

This table compares Fortune Brands Home & Security and Trex’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Fortune Brands Home & Security $5.13 billion 1.94 $822.40 million $2.84 22.80
Trex $504.24 million 4.72 $131.61 million $2.58 31.40

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

Profitability

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

Net Margins Return on Equity Return on Assets
Fortune Brands Home & Security 8.61% 18.93% 8.88%
Trex 15.12% 56.76% 33.15%

Risk & Volatility

Fortune Brands Home & Security has a beta of 1.37, meaning that its stock price is 37% more volatile than the S&P 500. Comparatively, Trex has a beta of 2.32, meaning that its stock price is 132% more volatile than the S&P 500.

Insider & Institutional Ownership

88.3% of Fortune Brands Home & Security shares are owned by institutional investors. Comparatively, 92.2% of Trex shares are owned by institutional investors. 1.6% of Fortune Brands Home & Security shares are owned by company insiders. Comparatively, 1.0% of Trex shares are owned by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds 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 1.1%. Trex does not pay a dividend. Fortune Brands Home & Security pays out 25.4% of its earnings in the form of a dividend. Trex has increased its dividend for 3 consecutive years.

Summary

Trex beats Fortune Brands Home & Security on 9 of the 17 factors compared between the two stocks.

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.

Trex Company Profile

Trex Company, Inc. is a manufacturer of wood-alternative decking and railing products. The Company’s products are marketed under the brand name Trex and are manufactured in the United States. It offers a set of outdoor living products in the decking, railing, porch, fencing, trim, steel deck framing and outdoor lighting categories. Its decking products include Trex Transcend, Trex Enhance and Trex Select. The Company’s railing products include Trex Transcend Railing, Trex Select Railing and Trex Signature aluminum railing. It offers Trex Transcend Porch Flooring and Railing System, which is an integrated system of porch components and accessories. The Company offers Trex Seclusions fencing product, which consists of structural posts, bottom rail, pickets, top rail and decorative post caps. It offers a triple-coated steel deck framing system called Trex Elevations. The Company also offers outdoor lighting systems, such as Trex DeckLighting and Trex Landscape Lighting.

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