Critical Review: Griffon (NYSE:GFF) and Quanex Building Products (NYSE:NX)

Griffon (NYSE:GFF) and Quanex Building Products (NYSE:NX) are both industrials companies, but which is the better business? We will contrast the two businesses based on the strength of their institutional ownership, risk, earnings, valuation, profitability, analyst recommendations and dividends.

Insider and Institutional Ownership

73.2% of Griffon shares are owned by institutional investors. Comparatively, 97.5% of Quanex Building Products shares are owned by institutional investors. 10.2% of Griffon shares are owned by insiders. Comparatively, 1.9% of Quanex Building Products shares are owned by 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.

Profitability

This table compares Griffon and Quanex Building Products’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Griffon	8.08%	249.31%	12.64%
Quanex Building Products	2.43%	11.68%	4.29%

Volatility and Risk

Griffon has a beta of 1.45, suggesting that its stock price is 45% more volatile than the S&P 500. Comparatively, Quanex Building Products has a beta of 0.94, suggesting that its stock price is 6% less volatile than the S&P 500.

Analyst Ratings

This is a summary of recent ratings and target prices for Griffon and Quanex Building Products, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Griffon	0	1	1	2	3.25
Quanex Building Products	1	1	1	0	2.00

Griffon presently has a consensus price target of $122.50, indicating a potential upside of 23.03%. Quanex Building Products has a consensus price target of $28.00, indicating a potential upside of 23.62%. Given Quanex Building Products’ higher possible upside, analysts plainly believe Quanex Building Products is more favorable than Griffon.

Dividends

Griffon pays an annual dividend of $0.88 per share and has a dividend yield of 0.9%. Quanex Building Products pays an annual dividend of $0.32 per share and has a dividend yield of 1.4%. Griffon pays out 22.4% of its earnings in the form of a dividend. Quanex Building Products pays out 32.3% 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. Griffon has increased its dividend for 1 consecutive years.

Earnings & Valuation

This table compares Griffon and Quanex Building Products”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Griffon	$2.52 billion	1.79	$51.11 million	$3.92	25.40
Quanex Building Products	$1.84 billion	0.57	-$250.81 million	$0.99	22.88

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

Summary

Griffon beats Quanex Building Products on 14 of the 17 factors compared between the two stocks.

About Griffon

Griffon Corporation, through its subsidiaries, provides consumer and professional, and home and building products in the United States, Europe, Canada, Australia, and internationally. The company operates through two segments: Home and Building Products, and Consumer and Professional Products. The Home and Building Products segment manufactures and markets residential and commercial sectional garage doors, rolling steel service doors, fire doors, shutters, steel security grilles, and room dividers for the use in commercial construction and repair, and home remodeling applications. The segment also sells related products, such as garage door openers. The Consumer and Professional Products segment manufactures and markets long-handled engineered tools, including spades, hoes, cultivators, weeders, post hole diggers, scrapers, edgers and forks; wheelbarrows and lawn carts; snow tools comprising pushers, roof rakes, sled sleigh shovels, scoops, and ice scrapers; and pruning products, such as pruners, loppers, shears, and other tools. The segment also offers striking tools, including axes, picks, mattocks, mauls, wood splitters, sledgehammers, pry bars, and repair handles; traditional and gardening hand tools comprising hammers, screwdrivers, pliers, adjustable wrenches, handsaws, tape measures, levels, clamps, trowels, cultivators, weeders, and other hand tools; indoor and outdoor planters and lawn accessories; and garden hoses and hose reels. In addition, the segment provides home organization products, including wire and wood shelving, containers, storage cabinets, and other closet and home organization accessories; residential, industrial, and commercial fans; and cleaning products, such as brooms, brushes, squeegees, and other cleaning products. The company was formerly known as Instrument Systems Corporation and changed its name to Griffon Corporation in June 1992. Griffon Corporation was founded in 1774 and is headquartered in New York, New York.

About Quanex Building Products

Quanex Building Products Corporation, together with its subsidiaries, provides components for the fenestration industry in the United States, rest of Europe, Canada, Asia, the United Kingdom, and internationally. The company operates through three segments: North American Fenestration, European Fenestration, and North American Cabinet Components. It offers flexible insulating glass spacers, extruded vinyl profiles, window and door screens, and precision-formed metal and wood products, as well as cabinet doors and other components for original equipment manufacturers (OEMs) in the kitchen and bathroom cabinet industry. In addition, the company provides various non-fenestration components and products, including solar panel sealants, trim moldings, vinyl decking, fencing, water retention barriers, and conservatory roof components. It sells its products to OEMs in the building products industry through sales representatives, direct sales force, distributors, and independent sales agents. Quanex Building Products Corporation was founded in 1927 and is based in Houston, Texas.