Critical Analysis: Simpson Manufacturing (NYSE:SSD) vs. United Rentals (NYSE:URI)

Simpson Manufacturing (NYSE:SSD) and United Rentals (NYSE:URI) are both construction companies, but which is the better business? We will compare the two businesses based on the strength of their risk, valuation, institutional ownership, earnings, dividends, profitability and analyst recommendations.

Earnings and Valuation

This table compares Simpson Manufacturing and United Rentals”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Simpson Manufacturing	$2.33 billion	3.39	$345.08 million	$8.53	22.57
United Rentals	$16.10 billion	4.19	$2.49 billion	$39.20	27.45

United Rentals has higher revenue and earnings than Simpson Manufacturing. Simpson Manufacturing is trading at a lower price-to-earnings ratio than United Rentals, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Simpson Manufacturing and United Rentals’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Simpson Manufacturing	14.92%	17.72%	11.72%
United Rentals	15.32%	30.56%	9.23%

Dividends

Simpson Manufacturing pays an annual dividend of $1.16 per share and has a dividend yield of 0.6%. United Rentals pays an annual dividend of $7.88 per share and has a dividend yield of 0.7%. Simpson Manufacturing pays out 13.6% of its earnings in the form of a dividend. United Rentals pays out 20.1% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Simpson Manufacturing has raised its dividend for 11 consecutive years and United Rentals has raised its dividend for 3 consecutive years.

Analyst Ratings

This is a summary of current ratings and recommmendations for Simpson Manufacturing and United Rentals, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Simpson Manufacturing	0	2	3	0	2.60
United Rentals	1	2	13	0	2.75

Simpson Manufacturing currently has a consensus target price of $214.75, suggesting a potential upside of 11.57%. United Rentals has a consensus target price of $1,045.81, suggesting a potential downside of 2.81%. Given Simpson Manufacturing’s higher probable upside, research analysts plainly believe Simpson Manufacturing is more favorable than United Rentals.

Volatility and Risk

Simpson Manufacturing has a beta of 1.32, indicating that its stock price is 32% more volatile than the S&P 500. Comparatively, United Rentals has a beta of 1.81, indicating that its stock price is 81% more volatile than the S&P 500.

Insider & Institutional Ownership

93.7% of Simpson Manufacturing shares are owned by institutional investors. Comparatively, 96.3% of United Rentals shares are owned by institutional investors. 0.3% of Simpson Manufacturing shares are owned by insiders. Comparatively, 0.5% of United Rentals shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company will outperform the market over the long term.

Summary

United Rentals beats Simpson Manufacturing on 13 of the 17 factors compared between the two stocks.

About Simpson Manufacturing

Simpson Manufacturing Co., Inc., through its subsidiaries, designs, engineers, manufactures, and sells structural solutions for wood, concrete, and steel connections. The company offers wood construction products, including connectors, truss plates, fastening systems, fasteners and shearwalls, and pre-fabricated lateral systems for use in light-frame construction; and concrete construction products comprising adhesives, specialty chemicals, mechanical anchors, carbide drill bits, powder actuated tools, fiber-reinforced materials, and other repair products for use in concrete, masonry, and steel construction, as well as grouts, coatings, sealers, mortars, fiberglass and fiber-reinforced polymer systems, and asphalt products for use in concrete construction repair, and strengthening and protection products. It also provides connectors and lateral products for wood framing, timber and offsite construction, structural steel construction, and cold-formed steel applications; and mechanical and adhesive anchors for concrete and masonry construction applications. In addition, the company offers engineering and design services, as well as software solutions that facilitate the specification, selection, and use of its products. It markets its products to the residential construction, light industrial and commercial construction, infrastructure construction, remodeling, and do-it-yourself markets in the United States, Canada, France, the United Kingdom, Germany, Denmark, Switzerland, Portugal, Poland, the Netherlands, Belgium, Spain, Italy, Romania, Sweden, Norway, Australia, New Zealand, China, Taiwan, and Vietnam. The company was founded in 1956 and is headquartered in Pleasanton, California.

About United Rentals

United Rentals, Inc., through its subsidiaries, operates as an equipment rental company. It operates in two segments, General Rentals and Specialty. The General Rentals segment rents general construction and industrial equipment includes backhoes, skid-steer loaders, forklifts, earthmoving equipment, and material handling equipment; aerial work platforms, such as boom and scissor lifts; and general tools and light equipment comprising pressure washers, water pumps, and power tools for construction and industrial companies, manufacturers, utilities, municipalities, homeowners, and government entities. The specialty segment rents specialty construction products, including trench safety equipment consists of trench shields, aluminum hydraulic shoring systems, slide rails, crossing plates, construction lasers, and line testing equipment for underground work; power and heating, ventilating, and air conditioning equipment, such as portable diesel generators, electrical distribution equipment, and temperature control equipment; fluid solutions equipment for fluid containment, transfer, and treatment; and mobile storage equipment and modular office space. This segment serves construction companies involved in infrastructure projects, and municipalities and industrial companies. It also sells aerial lifts, reach forklifts, telehandlers, compressors, and generators; construction consumables, tools, small equipment, and safety supplies; and parts for equipment that is owned by its customers, as well as provides repair and maintenance services. The company sells used equipment through its sales force, brokers, website, at auctions, and directly to manufacturers. The company operates in the United States, Canada, Europe, Australia, and New Zealand. United Rentals, Inc. was incorporated in 1997 and is headquartered in Stamford, Connecticut.