Advanced Drainage Systems (NYSE: WMS) and UFP Technologies (NASDAQ:UFPT) are both small-cap construction companies, but which is the better investment? We will contrast the two businesses based on the strength of their earnings, profitability, valuation, analyst recommendations, risk, institutional ownership and dividends.

Institutional and Insider Ownership

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79.6% of Advanced Drainage Systems shares are held by institutional investors. Comparatively, 69.3% of UFP Technologies shares are held by institutional investors. 21.4% of Advanced Drainage Systems shares are held by company insiders. Comparatively, 13.3% of UFP Technologies shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Profitability

This table compares Advanced Drainage Systems and UFP Technologies’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Advanced Drainage Systems 3.67% 45.42% 3.58%
UFP Technologies 6.23% 7.70% 6.82%

Risk and Volatility

Advanced Drainage Systems has a beta of 0.88, meaning that its share price is 12% less volatile than the S&P 500. Comparatively, UFP Technologies has a beta of 0.11, meaning that its share price is 89% less volatile than the S&P 500.

Valuation & Earnings

This table compares Advanced Drainage Systems and UFP Technologies’ revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Advanced Drainage Systems $1.26 billion 1.12 $32.95 million $0.50 50.00
UFP Technologies $147.84 million 1.57 $9.21 million $1.25 25.32

Advanced Drainage Systems has higher revenue and earnings than UFP Technologies. UFP Technologies is trading at a lower price-to-earnings ratio than Advanced Drainage Systems, indicating that it is currently the more affordable of the two stocks.

Dividends

Advanced Drainage Systems pays an annual dividend of $0.28 per share and has a dividend yield of 1.1%. UFP Technologies does not pay a dividend. Advanced Drainage Systems pays out 56.0% of its earnings in the form of a dividend. Advanced Drainage Systems has increased its dividend for 2 consecutive years.

Analyst Ratings

This is a breakdown of recent ratings for Advanced Drainage Systems and UFP Technologies, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Advanced Drainage Systems 0 4 1 0 2.20
UFP Technologies 0 0 0 0 N/A

Advanced Drainage Systems currently has a consensus price target of $26.25, suggesting a potential upside of 5.00%. Given Advanced Drainage Systems’ higher possible upside, equities research analysts plainly believe Advanced Drainage Systems is more favorable than UFP Technologies.

Summary

Advanced Drainage Systems beats UFP Technologies on 11 of the 16 factors compared between the two stocks.

Advanced Drainage Systems Company Profile

Advanced Drainage Systems, Inc. designs, manufactures, and markets thermoplastic corrugated pipes and related water management products for non-residential, residential, agriculture, and infrastructure applications in the United States and internationally. The company provides single, double, and triple wall corrugated polypropylene and polyethylene pipes; and allied products comprising storm retention/detention and septic chambers, polyvinyl chloride drainage structures, fittings, and water quality filters and separators. It also purchases and distributes construction fabrics, as well as other geosynthetic products for soil stabilization, reinforcement, filtration, separation, erosion control, and sub-surface drainage. The company was founded in 1966 and is headquartered in Hilliard, Ohio.

UFP Technologies Company Profile

UFP Technologies, Inc. is a designer and custom converter of foams, plastics, composites and natural fiber materials. The Company is engaged in providing solutions to customers primarily within the medical, automotive, consumer, electronics, industrial, and aerospace and defense markets. It converts these materials using laminating, molding, and fabricating manufacturing technologies. The Company’s raw materials consist of polyethylene and polyurethane foams, sheet plastics, pulp fiber, cross-linked polyethylene and reticulated polyurethane foams, fabric and foam laminates, and natural fiber materials. The Company converts these materials to provide customers various solutions, including automotive interior trim, medical device components, disposable wound care components, military uniform and gear components, athletic padding, air filtration, high-temperature insulation, abrasive nail files and other beauty aids, and cushion packaging for their products.

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