Critical Review: Koppers (KOP) and Trex (TREX)

Koppers (NYSE: KOP) and Trex (NYSE:TREX) are both basic materials companies, but which is the better stock? We will compare the two companies based on the strength of their institutional ownership, risk, valuation, dividends, analyst recommendations, earnings and profitability.

Analyst Recommendations

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This is a breakdown of recent ratings for Koppers and Trex, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Koppers 0 1 4 0 2.80
Trex 0 5 2 0 2.29

Koppers currently has a consensus target price of $48.60, indicating a potential upside of 9.46%. Trex has a consensus target price of $98.33, indicating a potential downside of 11.09%. Given Koppers’ stronger consensus rating and higher possible upside, research analysts plainly believe Koppers is more favorable than Trex.

Earnings and Valuation

This table compares Koppers and Trex’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Koppers $1.48 billion 0.63 $29.10 million $3.68 12.07
Trex $565.15 million 5.76 $95.12 million $3.16 35.00

Trex has lower revenue, but higher earnings than Koppers. Koppers is trading at a lower price-to-earnings ratio than Trex, indicating that it is currently the more affordable of the two stocks.

Volatility & Risk

Koppers has a beta of 0.89, suggesting that its stock price is 11% less volatile than the S&P 500. Comparatively, Trex has a beta of 2.25, suggesting that its stock price is 125% more volatile than the S&P 500.

Institutional & Insider Ownership

91.9% of Koppers shares are held by institutional investors. Comparatively, 91.1% of Trex shares are held by institutional investors. 8.7% of Koppers shares are held by insiders. Comparatively, 1.0% of Trex 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.

Profitability

This table compares Koppers and Trex’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Koppers 1.97% 94.85% 6.93%
Trex 16.83% 46.94% 30.00%

Summary

Koppers beats Trex on 8 of the 14 factors compared between the two stocks.

About Koppers

Koppers Holdings Inc., through its subsidiaries, provides treated wood products, wood treatment chemicals, and carbon compounds in the United States and internationally. The company operates through three segments: Railroad and Utility Products and Services (RUPS), Performance Chemicals (PC), and Carbon Materials and Chemicals (CMC). The RUPS segment procures and treats crossties, switch ties, and various types of lumber used for railroad bridges and crossings. It also provides rail joint bars to join rails together for railroads; transmission and distribution poles for electric and telephone utilities; and pilings. This segment also provides railroad services, such as engineering, design, repair, and inspection services for railroad bridges. The Performance Chemicals segment develops, manufactures, and markets water-based wood preservatives and wood specialty additives, including micronized copper quaternary and micronized copper azole, micronized pigments, alkaline copper quaternary, amine copper azole, and chromated copper arsenate for decking, fencing, utility poles, construction lumber and timbers, and vineyard stakes. The CMC segment manufactures creosote for use in the treatment of wood or as a feedstock in the production of carbon black; carbon pitch, a raw material used in the production of aluminum and steel; naphthalene for use as a feedstock in the production of phthalic anhydride and as a surfactant in the production of concrete; phthalic anhydride for the production of plasticizers, polyester resins, and alkyd paints; and carbon black feedstock for use in the production of carbon black. The company serves the railroad, specialty chemical, utility, residential lumber, agriculture, aluminum, steel, rubber, and construction industries. Koppers Holdings Inc. was founded in 1988 and is headquartered in Pittsburgh, Pennsylvania.

About Trex

Trex Company, Inc. manufactures and distributes wood/plastic composite products, and related accessories primarily for the residential and commercial decking, and railing applications in the United States. It offers Trex Transcend, Trex Enhance, and Trex Select protective shells for protection against fading, staining, mold, and scratching; and Trex Hideaway, a hidden fastening system for grooved boards. The company also provides railing products, such as Trex Transcend Railing for use with Trex decking products and other decking materials; Trex Select Railing for simple clean finished look; and Trex Signature aluminum railing for contemporary look. In addition, it offers Trex Seclusions fencing product, which includes structural posts, bottom and top rails, pickets, and decorative post caps; steel deck framing systems under the Trex Elevations name; Trex DeckLighting, a line of energy-efficient LED dimmable deck lighting for use on posts, floors, and steps; and Trex LandscapeLighting products. Further, the company acts as a licensor in various licensing agreements with third parties to manufacture and sell products under Trex name, including Trex Outdoor Furniture; Trex RainEscape, an above joist deck drainage system; Trex CustomCurve that allows contractors to heat and bend Trex products; Trex Pergola, a cellular PVC product; Trex Latticeworks outdoor lattice boards; Trex Cornhole boards; Diablo Trex Blade, a saw blade for wood-plastic composite decking; Trex SpiralStairs and structural steel posts; and Trex Outdoor Kitchens, Cabinetry, and Storage. Additionally, it offers architectural and aluminum railing systems, custom railing options, and portable stage platforms. The company sells its products through wholesale distributors, retail lumber dealers, and Home Depot and Lowe's stores, as well as through its direct sales staff, independent sales representatives, and bidding on projects. The company was founded in 1996 and is headquartered in Winchester, Virginia.

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