Armstrong World Industries (NYSE:AWI) & AZZ (NYSE:AZZ) Critical Review

AZZ (NYSE:AZZ) and Armstrong World Industries (NYSE:AWI) are both mid-cap industrials companies, but which is the better investment? We will compare the two businesses based on the strength of their valuation, risk, analyst recommendations, profitability, institutional ownership, dividends and earnings.

Valuation & Earnings

This table compares AZZ and Armstrong World Industries”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
AZZ	$1.65 billion	2.76	$317.26 million	$6.56	23.07
Armstrong World Industries	$1.62 billion	4.86	$308.70 million	$7.30	25.51

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

Dividends

AZZ pays an annual dividend of $0.96 per share and has a dividend yield of 0.6%. Armstrong World Industries pays an annual dividend of $1.36 per share and has a dividend yield of 0.7%. AZZ pays out 14.6% of its earnings in the form of a dividend. Armstrong World Industries pays out 18.6% 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. Armstrong World Industries has increased its dividend for 1 consecutive years. Armstrong World Industries is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Institutional & Insider Ownership

90.9% of AZZ shares are held by institutional investors. Comparatively, 98.9% of Armstrong World Industries shares are held by institutional investors. 1.7% of AZZ shares are held by company insiders. Comparatively, 1.2% of Armstrong World Industries shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Profitability

This table compares AZZ and Armstrong World Industries’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
AZZ	11.83%	14.18%	8.48%
Armstrong World Industries	18.60%	37.35%	17.06%

Analyst Recommendations

This is a summary of current ratings for AZZ and Armstrong World Industries, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
AZZ	0	3	4	0	2.57
Armstrong World Industries	0	3	5	1	2.78

AZZ presently has a consensus target price of $155.25, suggesting a potential upside of 2.57%. Armstrong World Industries has a consensus target price of $213.00, suggesting a potential upside of 14.39%. Given Armstrong World Industries’ stronger consensus rating and higher possible upside, analysts clearly believe Armstrong World Industries is more favorable than AZZ.

Volatility & Risk

AZZ has a beta of 1.12, meaning that its share price is 12% more volatile than the S&P 500. Comparatively, Armstrong World Industries has a beta of 1.16, meaning that its share price is 16% more volatile than the S&P 500.

Summary

Armstrong World Industries beats AZZ on 14 of the 18 factors compared between the two stocks.

About AZZ

AZZ Inc. provides hot-dip galvanizing and coil coating solutions in North America. It offers metal finishing solutions for corrosion protection, including hot-dip galvanizing, spin galvanizing, powder coating, anodizing, and plating to steel fabrication and other industries, as well as to fabricators or manufacturers that provide services to the transmission and distribution, bridge and highway, petrochemical, and general industrial markets; and original equipment manufacturers. It also provides aesthetic and corrosion protective coatings and related value-added services for steel and aluminum coil primarily serving the construction; appliance; heating, ventilation, and air conditioning; container; transportation; and other end markets. The company was incorporated in 1956 and is headquartered in Fort Worth, Texas.

About Armstrong World Industries

Armstrong World Industries, Inc., together with its subsidiaries, engages in the design, manufacture, and sale of ceiling and wall solutions in the Americas. It operates through Mineral Fiber and Architectural Specialties segments. The company offers mineral fiber, fiberglass wool, metal, wood, felt, wood fiber, and glass-reinforced-gypsum; ceiling component products, such as ceiling perimeters and trims, as well as grid products that support drywall ceiling systems; ceilings, walls, and facades for use in commercial settings; and manufactures ceiling suspension system (grid) products. It serves commercial and residential construction markets, as well as renovation of existing buildings sectors. The company sells its products to resale distributors, ceiling system contractors, wholesalers, and retailers comprising large home centers. Armstrong World Industries, Inc. was founded in 1860 and is headquartered in Lancaster, Pennsylvania.