Head-To-Head Analysis: Advanced Drainage Systems (NYSE:WMS) vs. Argan (NYSE:AGX)

Advanced Drainage Systems (NYSE:WMS) and Argan (NYSE:AGX) are both construction companies, but which is the better investment? We will compare the two businesses based on the strength of their dividends, risk, analyst recommendations, institutional ownership, profitability, valuation and earnings.

Dividends

Advanced Drainage Systems pays an annual dividend of $0.72 per share and has a dividend yield of 0.4%. Argan pays an annual dividend of $2.00 per share and has a dividend yield of 0.5%. Advanced Drainage Systems pays out 12.0% of its earnings in the form of a dividend. Argan pays out 23.6% 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. Advanced Drainage Systems has raised its dividend for 1 consecutive years and Argan has raised its dividend for 2 consecutive years. Argan is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Volatility & Risk

Advanced Drainage Systems has a beta of 1.34, indicating that its stock price is 34% more volatile than the S&P 500. Comparatively, Argan has a beta of 0.63, indicating that its stock price is 37% less volatile than the S&P 500.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Advanced Drainage Systems	15.75%	27.72%	12.31%
Argan	13.11%	31.38%	13.47%

Earnings & Valuation

This table compares Advanced Drainage Systems and Argan”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Advanced Drainage Systems	$2.90 billion	4.59	$450.17 million	$6.01	28.45
Argan	$874.18 million	6.52	$85.46 million	$8.49	48.41

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

Analyst Recommendations

This is a breakdown of current recommendations for Advanced Drainage Systems and Argan, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Advanced Drainage Systems	0	1	8	0	2.89
Argan	0	5	3	0	2.38

Advanced Drainage Systems currently has a consensus target price of $186.00, indicating a potential upside of 8.78%. Argan has a consensus target price of $355.20, indicating a potential downside of 13.58%. Given Advanced Drainage Systems’ stronger consensus rating and higher possible upside, analysts plainly believe Advanced Drainage Systems is more favorable than Argan.

Insider & Institutional Ownership

89.8% of Advanced Drainage Systems shares are held by institutional investors. Comparatively, 79.4% of Argan shares are held by institutional investors. 1.6% of Advanced Drainage Systems shares are held by company insiders. Comparatively, 6.7% of Argan shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock will outperform the market over the long term.

Summary

Advanced Drainage Systems beats Argan on 9 of the 17 factors compared between the two stocks.

About Advanced Drainage Systems

Advanced Drainage Systems, Inc. designs, manufactures, and markets thermoplastic corrugated pipes and related water management products in North America and internationally. The company operates through Pipe, International, Infiltrator, and Allied Products & Other segments. It offers single, double, and triple wall corrugated polypropylene and polyethylene pipes; plastic leachfield chambers and systems; EZflow synthetic aggregate bundles; wastewater purification through mechanical aeration wastewater for residential and commercial systems; septic tanks and accessories; combined treatment and dispersal systems, including advanced enviro-septic and advanced treatment leachfield systems; and allied products, including storm retention/detention and septic chambers, polyvinyl chloride drainage structures, fittings, and water quality filters and separators. The company also purchases and distributes construction fabrics and other geosynthetic products for soil stabilization, reinforcement, filtration, separation, erosion control, and sub-surface drainage, as well as drainage grates and other products. In addition, it provides PVC hubs, rubber sleeves, and stainless-steel bands. The company offers its products for non-residential, residential, agriculture, and infrastructure applications through a network of distribution centers. Advanced Drainage Systems, Inc. incorporated in 1966 and is headquartered in Hilliard, Ohio.

About Argan

Argan, Inc., through its subsidiaries, provides engineering, procurement, construction, commissioning, maintenance, project development, and technical consulting services to the power generation market. The company operates through Power Services, Industrial Services, and Telecom Services segments. The Power Services segment offers engineering, procurement, and construction, as well as designing, building, and commissioning of large-scale energy projects to the owners of alternative energy facilities, such as biomass plants, wind farms, and solar fields; and design, construction, project management, start-up, and operation services for projects with approximately 18 gigawatts of power-generating capacity. This segment serves independent power project owners, public utilities, power plant equipment suppliers, and other commercial firms. The Industrial Services segment provides industrial construction and field services and vessel fabrication services for fertilizer, engineering and construction, forest products, and various other industrial companies in southeast region of the United States. The Telecom Services segment offers trenchless directional boring and excavation for underground communication and power networks, as well as aerial cabling services; and installs buried cable, high and low voltage electric lines, and private area outdoor lighting systems. It also provides structured cabling, terminations, and connectivity that offers the physical transport for high-speed data, voice, video, and security networks. This segment serves electricity cooperative, state and local government agencies, counties and municipalities, and technology-oriented government contracting firms, as well as federal government facilities in the mid-Atlantic region of the United States. Argan, Inc. was incorporated in 1961 and is headquartered in Rockville, Maryland.