Considering both are in an industry with tailwinds and have done significant capex (I assume capex is completed), both could be good investment candidates. Since cashflow parameters aren’t mentioned, let’s assume they are equally capable on cashflow conversion (probably an oversimplification but let’s proceed).
It all depends on risk appetite and starting valuations.
Company A’s recent past is chequered and you mention this is due to incorrect vision, so is there reason to doubt management’s capabilities and decision making? Due to suppressed RoE and margins, with better margins and growth coming back you can expect earnings growth and rerating. Look at mean margins and increasing utilisation for forecasting. How much can they grow the business in a good cycle? Put together with your exit multiple, you could estimate the returns.
Company B is already probably a market leader thanks to sustained higher margins. How much can this company grow? With same margins, the returns should mimic the earnings growth largely. Importantly, are there levers for margins expansion through operating leverage or efficiencies? This would add to returns above.
One thing to note is typically during a good cycle, you never know for sure if the growth is sustainable or just a good cycle upbeat.
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