Reviewing Trex (TREX) and Norbord (OSB)

Trex (NYSE: TREX) and Norbord (NYSE:OSB) are both mid-cap construction companies, but which is the superior business? We will contrast the two companies based on the strength of their profitability, dividends, analyst recommendations, earnings, risk, valuation and institutional ownership.

Dividends

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Norbord pays an annual dividend of $1.87 per share and has a dividend yield of 4.9%. Trex does not pay a dividend. Norbord pays out 41.6% of its earnings in the form of a dividend.

Analyst Recommendations

This is a summary of recent recommendations for Trex and Norbord, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Trex 0 5 2 0 2.29
Norbord 2 3 2 0 2.00

Trex currently has a consensus price target of $98.33, suggesting a potential downside of 10.69%. Norbord has a consensus price target of $39.25, suggesting a potential upside of 1.95%. Given Norbord’s higher probable upside, analysts plainly believe Norbord is more favorable than Trex.

Volatility & Risk

Trex has a beta of 2.25, indicating that its stock price is 125% more volatile than the S&P 500. Comparatively, Norbord has a beta of 2.67, indicating that its stock price is 167% more volatile than the S&P 500.

Insider and Institutional Ownership

91.1% of Trex shares are held by institutional investors. Comparatively, 78.7% of Norbord shares are held by institutional investors. 1.0% of Trex shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Profitability

This table compares Trex and Norbord’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Trex 16.83% 46.94% 30.00%
Norbord 20.03% 45.78% 20.61%

Earnings and Valuation

This table compares Trex and Norbord’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Trex $565.15 million 5.73 $95.12 million $3.16 34.84
Norbord $2.18 billion 1.53 $436.00 million $4.49 8.57

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

Summary

Trex beats Norbord on 8 of the 15 factors compared between the two stocks.

About Trex

Trex Company, Inc. manufactures and distributes wood/plastic composite products, and related accessories primarily for the residential and commercial decking, and railing applications in the United States. It offers Trex Transcend, Trex Enhance, and Trex Select protective shells for protection against fading, staining, mold, and scratching; and Trex Hideaway, a hidden fastening system for grooved boards. The company also provides railing products, such as Trex Transcend Railing for use with Trex decking products and other decking materials; Trex Select Railing for simple clean finished look; and Trex Signature aluminum railing for contemporary look. In addition, it offers Trex Seclusions fencing product, which includes structural posts, bottom and top rails, pickets, and decorative post caps; steel deck framing systems under the Trex Elevations name; Trex DeckLighting, a line of energy-efficient LED dimmable deck lighting for use on posts, floors, and steps; and Trex LandscapeLighting products. Further, the company acts as a licensor in various licensing agreements with third parties to manufacture and sell products under Trex name, including Trex Outdoor Furniture; Trex RainEscape, an above joist deck drainage system; Trex CustomCurve that allows contractors to heat and bend Trex products; Trex Pergola, a cellular PVC product; Trex Latticeworks outdoor lattice boards; Trex Cornhole boards; Diablo Trex Blade, a saw blade for wood-plastic composite decking; Trex SpiralStairs and structural steel posts; and Trex Outdoor Kitchens, Cabinetry, and Storage. Additionally, it offers architectural and aluminum railing systems, custom railing options, and portable stage platforms. The company sells its products through wholesale distributors, retail lumber dealers, and Home Depot and Lowe's stores, as well as through its direct sales staff, independent sales representatives, and bidding on projects. The company was founded in 1996 and is headquartered in Winchester, Virginia.

About Norbord

Norbord Inc. manufactures and sells wood-based panels for retail chains, contractor supply yards, and industrial manufacturers primarily in North America and Europe. The company offers oriented strand boards for use in sheathing, flooring, and roofing in home construction applications; particleboards that are used in flooring and other construction applications; and medium density fiberboards for use in cabinet doors, mouldings, and interior wall paneling applications, as well as related value-added products for use in the construction of new homes, and renovation and repair of existing structures. It markets its products under the Durastrand pointSIX, Pinnacle, Stabledge, TruFlor pointSIX and TruFlor, SteadiTred, QuakeZone, Tallwall, Trubord and Windstorm, SolarBord, TruDeck, StableDec, SterlingOSB, Caberwood, MDF, and Conti and Caberboard brands. The company was formerly known as Nexfor Inc. and changed its name to Norbord Inc. in June 2004. Norbord Inc. was founded in 1987 and is headquartered in Toronto, Canada.

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