Financial Analysis: Frontdoor (NASDAQ:FTDR) & TopBuild (NYSE:BLD)

TopBuild (NYSE:BLD) and Frontdoor (NASDAQ:FTDR) are both construction companies, but which is the superior business? We will compare the two companies based on the strength of their profitability, valuation, institutional ownership, dividends, analyst recommendations, risk and earnings.

Analyst Recommendations

This is a summary of current ratings and target prices for TopBuild and Frontdoor, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
TopBuild	0	9	5	1	2.47
Frontdoor	0	3	3	1	2.71

TopBuild presently has a consensus target price of $466.77, suggesting a potential upside of 11.63%. Frontdoor has a consensus target price of $68.60, suggesting a potential upside of 10.52%. Given TopBuild’s higher probable upside, equities research analysts clearly believe TopBuild is more favorable than Frontdoor.

Valuation & Earnings

This table compares TopBuild and Frontdoor”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
TopBuild	$5.41 billion	2.18	$521.73 million	$17.80	23.49
Frontdoor	$2.09 billion	2.08	$255.00 million	$3.49	17.79

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

Insider & Institutional Ownership

95.7% of TopBuild shares are owned by institutional investors. 0.5% of TopBuild shares are owned by company insiders. Comparatively, 1.6% of Frontdoor shares are owned by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company is poised for long-term growth.

Risk & Volatility

TopBuild has a beta of 1.8, indicating that its stock price is 80% more volatile than the S&P 500. Comparatively, Frontdoor has a beta of 1.5, indicating that its stock price is 50% more volatile than the S&P 500.

Profitability

This table compares TopBuild and Frontdoor’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
TopBuild	8.95%	23.53%	8.61%
Frontdoor	12.22%	118.62%	14.20%

Summary

TopBuild beats Frontdoor on 9 of the 14 factors compared between the two stocks.

About TopBuild

TopBuild Corp., together with its subsidiaries, engages in the installation and distribution of insulation and other building material products to the construction industry. The company operates in two segments, Installation and Specialty Distribution. It provides insulation products and accessories, glass and windows, rain gutters, garage doors, fireplaces, roofing materials, closet shelving, and other products. The company also offers insulation installation services for fiberglass batts and rolls, blown-in loose fill fiberglass, polyurethane spray foam, and blown-in loose fill cellulose applications. In addition, it distributes building and mechanical insulation, insulation accessories, and other building product materials for the residential, commercial, and industrial end markets. The company serves single-family homebuilders, single-family custom builders, multi-family builders, commercial general contractors, remodelers, and individual homeowners, as well as insulation contractors, gutter contractors, weatherization contractors, other contractors, dealers, metal building erectors, and modular home builders. It operates installation branches and distribution centers in the United States and Canada. The company was formerly known as Masco SpinCo Corp. and changed its name to TopBuild Corp. in March 2015. TopBuild Corp. was incorporated in 2015 and is headquartered in Daytona Beach, Florida.

About Frontdoor

Frontdoor, Inc. provides home warranties in the United States in the United States. Its customizable home warranties help customers protect and maintain their homes from costly and unplanned breakdowns of essential home systems and appliances. The company’s home warranty customers subscribe to an annual service plan agreement that covers the repair or replacement of principal components of approximately 20 home systems and appliances, including electrical, plumbing, water heaters, refrigerators, dishwashers, and ranges/ovens/cooktops, as well as electronics, pools, and spas and pumps; and heating, ventilation, and air conditioning systems. It also offers on-demand home services and a one-stop app experience for home repair and maintenance; and Streem technology, an app that empowers homeowners by connecting them in real time through video chat with qualified experts to diagnose and solve their problems. The company serves homeowners under the Frontdoor, American Home Shield, HSA, OneGuard, Landmark Home Warranty, Frontdoor logo, and Streem brands. The company was founded in 1971 and is headquartered in Memphis, Tennessee.