Foundation Building Materials (FBM) versus GMS (GMS) Critical Review

Foundation Building Materials (NYSE: FBM) and GMS (NYSE:GMS) are both small-cap construction companies, but which is the better investment? We will compare the two companies based on the strength of their institutional ownership, analyst recommendations, risk, valuation, earnings, dividends and profitability.

Volatility and Risk

Foundation Building Materials has a beta of 0.34, meaning that its share price is 66% less volatile than the S&P 500. Comparatively, GMS has a beta of 1.55, meaning that its share price is 55% more volatile than the S&P 500.

Earnings & Valuation

This table compares Foundation Building Materials and GMS’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Foundation Building Materials $2.06 billion 0.31 $82.48 million $0.30 49.33
GMS $2.32 billion 0.52 $48.88 million $1.70 17.14

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

Analyst Ratings

This is a summary of recent ratings for Foundation Building Materials and GMS, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Foundation Building Materials 0 1 4 2 3.14
GMS 0 1 9 0 2.90

Foundation Building Materials presently has a consensus price target of $17.67, suggesting a potential upside of 19.37%. GMS has a consensus price target of $39.20, suggesting a potential upside of 34.52%. Given GMS’s higher probable upside, analysts plainly believe GMS is more favorable than Foundation Building Materials.

Insider & Institutional Ownership

92.7% of Foundation Building Materials shares are held by institutional investors. Comparatively, 74.7% of GMS shares are held by institutional investors. 0.5% of Foundation Building Materials shares are held by company insiders. Comparatively, 5.9% of GMS shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Profitability

This table compares Foundation Building Materials and GMS’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Foundation Building Materials 3.66% 3.74% 0.93%
GMS 2.70% 12.75% 4.87%

Summary

GMS beats Foundation Building Materials on 9 of the 15 factors compared between the two stocks.

About Foundation Building Materials

Foundation Building Materials, Inc. distributes building products in the United States and Canada. It operates through two segments, Specialty Building Products and Mechanical Insulation. The Specialty Building Products segment distributes wallboard, metal framing, suspended ceiling system, and other products. It also provides wallboard accessories, stucco, and exterior insulation and finish systems, as well as tools, safety accessories, and fasteners. This segment serves non-residential, residential, and non-residential repair and remodel construction markets. The Mechanical Insulation segment distributes and fabricates commercial and industrial insulation for pipes and mechanical systems. It serves non-residential construction, non-residential repair and remodel construction, and industrial markets. The company was founded in 2011 and is headquartered in Tustin, California. Foundation Building Materials, Inc. is a subsidiary of LSF9 Cypress Parent 2 LLC.

About GMS

GMS Inc. distributes wallboards, suspended ceilings systems, and complementary interior construction products in North America. The company offers wallboard products; and ceilings products, such as suspended mineral fibers, soft fibers, and metal ceiling systems primarily used in offices, hotels, hospitals, retail facilities, schools, and other commercial and institutional buildings. It also distributes steel framing products, including steel tracks, studs, and various other steel products used to frame the interior walls of commercial or institutional buildings; and insulation, ready-mix joint compound, and various other interior construction products, as well as ancillary products, such as tools and safety products. The company markets and sells its products through a network of branches and distribution centers to the interior contractors, as well as home builders. GMS Inc. was founded in 1971 and is headquartered in Tucker, Georgia.

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