Financial Analysis: GMS (NYSE:GMS) versus Builders FirstSource (NYSE:BLDR)

Builders FirstSource (NYSE:BLDR) and GMS (NYSE:GMS) are both retail/wholesale companies, but which is the better stock? We will compare the two businesses based on the strength of their valuation, profitability, dividends, analyst recommendations, risk, earnings and institutional ownership.

Volatility & Risk

Builders FirstSource has a beta of 1.69, indicating that its share price is 69% more volatile than the S&P 500. Comparatively, GMS has a beta of 1.62, indicating that its share price is 62% more volatile than the S&P 500.

Profitability

This table compares Builders FirstSource and GMS’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Builders FirstSource	5.66%	28.02%	11.18%
GMS	2.09%	16.97%	6.28%

Analyst Ratings

This is a breakdown of current ratings for Builders FirstSource and GMS, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Builders FirstSource	0	4	15	1	2.85
GMS	0	6	2	1	2.44

Builders FirstSource presently has a consensus price target of $163.11, indicating a potential upside of 37.15%. GMS has a consensus price target of $90.58, indicating a potential downside of 9.07%. Given Builders FirstSource’s stronger consensus rating and higher probable upside, equities analysts plainly believe Builders FirstSource is more favorable than GMS.

Institutional & Insider Ownership

95.5% of Builders FirstSource shares are owned by institutional investors. Comparatively, 95.3% of GMS shares are owned by institutional investors. 1.8% of Builders FirstSource shares are owned by company insiders. Comparatively, 1.9% of GMS shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Valuation and Earnings

This table compares Builders FirstSource and GMS”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Builders FirstSource	$16.40 billion	0.80	$1.08 billion	$7.80	15.25
GMS	$5.51 billion	0.69	$115.47 million	$2.89	34.47

Builders FirstSource has higher revenue and earnings than GMS. Builders FirstSource is trading at a lower price-to-earnings ratio than GMS, indicating that it is currently the more affordable of the two stocks.

Summary

Builders FirstSource beats GMS on 12 of the 14 factors compared between the two stocks.

About Builders FirstSource

Builders FirstSource, Inc., together with its subsidiaries, manufactures and supplies building materials, manufactured components, and construction services to professional homebuilders, sub-contractors, remodelers, and consumers in the United States. It offers lumber and lumber sheet goods comprising dimensional lumber, plywood, and oriented strand board products that are used in on-site house framing; manufactured products, such as wood floor and roof trusses, floor trusses, wall panels, stairs, and engineered wood products; and windows, and interior and exterior door units, as well as interior trims and custom products comprising intricate mouldings, stair parts, and columns under the Synboard brand name. The company also provides specialty building products and services, including vinyl, composite and wood siding, exterior trims, metal studs, cement, roofing, insulation, wallboards, ceilings, cabinets, and hardware products; turn-key framing, shell construction, design assistance, and professional installation services. In addition, it offers software products, such as drafting, estimating, quoting, and virtual home design services, which provide software solutions to retailers, distributors, manufacturers, and homebuilders. The company was formerly known as BSL Holdings, Inc. and changed its name to Builders FirstSource, Inc. in October 1999. Builders FirstSource, Inc. was incorporated in 1998 and is based in Irving, Texas.

About GMS

GMS Inc. distributes wallboard, ceilings, steel framing and complementary construction products in the United States and Canada. The company offers ceilings products, including suspended mineral fibers, soft fibers, and metal ceiling systems primarily used in offices, hotels, hospitals, retail facilities, schools, and various other commercial and institutional buildings. It also provides steel framing products, such as steel tracks, studs, and various other steel products used to frame the interior walls of a commercial or institutional building, as well as ancillary products comprising tools, fasteners, insulation, EIFS and stucco, lumber and other wood products, ready-mix joint compound, and safety products. In addition, the company distributes a wallboard, ceilings, steel framing, and construction products, as well as commercial and residential building materials. It also operates through tool sales, rental, and service centers, as well as network of distribution centers. The company serves professional contractors and homebuilders. GMS Inc. was founded in 1971 and is headquartered in Tucker, Georgia.