Financial Contrast: A. O. Smith (NYSE:AOS) and Powell Industries (NASDAQ:POWL)

A. O. Smith (NYSE:AOS) and Powell Industries (NASDAQ:POWL) are both mid-cap industrials companies, but which is the better business? We will compare the two businesses based on the strength of their valuation, risk, earnings, profitability, institutional ownership, dividends and analyst recommendations.

Analyst Ratings

This is a summary of current ratings for A. O. Smith and Powell Industries, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
A. O. Smith	0	5	2	0	2.29
Powell Industries	0	0	1	1	3.50

A. O. Smith currently has a consensus price target of $75.29, indicating a potential upside of 15.74%. Powell Industries has a consensus price target of $312.00, indicating a potential upside of 63.99%. Given Powell Industries’ stronger consensus rating and higher probable upside, analysts plainly believe Powell Industries is more favorable than A. O. Smith.

Insider & Institutional Ownership

76.1% of A. O. Smith shares are owned by institutional investors. Comparatively, 89.8% of Powell Industries shares are owned by institutional investors. 0.8% of A. O. Smith shares are owned by insiders. Comparatively, 2.2% of Powell Industries shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock will outperform the market over the long term.

Earnings & Valuation

This table compares A. O. Smith and Powell Industries”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
A. O. Smith	$3.82 billion	2.42	$533.60 million	$3.58	18.17
Powell Industries	$1.01 billion	2.27	$149.85 million	$14.23	13.37

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

Profitability

This table compares A. O. Smith and Powell Industries’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
A. O. Smith	13.74%	28.39%	16.70%
Powell Industries	16.00%	35.43%	18.87%

Dividends

A. O. Smith pays an annual dividend of $1.36 per share and has a dividend yield of 2.1%. Powell Industries pays an annual dividend of $1.07 per share and has a dividend yield of 0.6%. A. O. Smith pays out 38.0% of its earnings in the form of a dividend. Powell Industries pays out 7.5% 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. A. O. Smith has raised its dividend for 31 consecutive years and Powell Industries has raised its dividend for 3 consecutive years. A. O. Smith is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Volatility & Risk

A. O. Smith has a beta of 1.21, meaning that its stock price is 21% more volatile than the S&P 500. Comparatively, Powell Industries has a beta of 0.72, meaning that its stock price is 28% less volatile than the S&P 500.

Summary

Powell Industries beats A. O. Smith on 10 of the 18 factors compared between the two stocks.

About A. O. Smith

A. O. Smith Corporation manufactures and markets residential and commercial gas and electric water heaters, boilers, heat pumps, tanks, and water treatment products in North America, China, Europe, and India. The company offers water heaters for residences, restaurants, hotels, office buildings, laundries, car washes, and small businesses; boilers for hospitals, schools, hotels, and other large commercial buildings, as well as homes, apartments, and condominiums; and water treatment products comprising point-of-entry water softeners, well water solutions, and whole-home water filtration products, and point-of-use carbon and reverse osmosis products for residences, restaurants, hotels, and offices. It also provides commercial water treatment and filtration product; expansion tanks, commercial solar water heating systems, swimming pool and spa heaters, and related products and parts; and electric wall-hung, gas tankless, combi-boiler, and heat pump and solar water heaters. The company offers its products under the A. O. Smith, State, Lochinvar, Hague, Water-Right, Master Water, Atlantic Filter, and Water Tec brands. It distributes its products through independent wholesale plumbing distributors, as well as to retail channels consisting of hardware and home center chains, and manufacturer representative firms; and offers Aquasana branded products directly to consumers through e-commerce channels. A. O. Smith Corporation was founded in 1874 and is headquartered in Milwaukee, Wisconsin.

About Powell Industries

Powell Industries, Inc., together with its subsidiaries, designs, develops, manufactures, sells, and services custom-engineered equipment and systems. The company’s principal products include integrated power control room substations, custom-engineered modules, electrical houses, medium-voltage circuit breakers, monitoring and control communications systems, motor control centers, switches, and bus duct systems, as well as traditional and arc-resistant distribution switchgears and control gears. Its products have application in voltages ranging from 480 volts to 38,000 volts. The company also provide field service inspection, installation, commissioning, modification and repair, spare parts, retrofit and retrofill components for existing systems, and replacement circuit breakers for switchgear. It serves onshore and offshore production, liquefied natural gas facilities and terminals, pipelines, refineries, and petrochemical plants, as well as electric utility, light rail traction power, mining and metals, pulp and paper, data centers and other municipal, commercial, and industrial markets. The company has operations in the United States, Canada, the Middle East, Africa, Europe, Mexico, and Central and South America. Powell Industries, Inc. was founded in 1947 and is headquartered in Houston, Texas.