Franklin Electric (NASDAQ:FELE) & A. O. Smith (NYSE:AOS) Critical Review

Franklin Electric (NASDAQ:FELE) and A. O. Smith (NYSE:AOS) are both mid-cap industrials companies, but which is the superior stock? We will compare the two companies based on the strength of their risk, institutional ownership, valuation, profitability, dividends, earnings and analyst recommendations.

Volatility & Risk

Franklin Electric has a beta of 1.09, suggesting that its share price is 9% more volatile than the S&P 500. Comparatively, A. O. Smith has a beta of 1.3, suggesting that its share price is 30% more volatile than the S&P 500.

Profitability

This table compares Franklin Electric and A. O. Smith’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Franklin Electric	6.71%	14.24%	9.46%
A. O. Smith	13.85%	29.34%	16.86%

Earnings & Valuation

This table compares Franklin Electric and A. O. Smith”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Franklin Electric	$2.11 billion	1.91	$180.31 million	$3.07	29.47
A. O. Smith	$3.83 billion	2.31	$533.60 million	$3.71	17.15

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

Dividends

Franklin Electric pays an annual dividend of $1.06 per share and has a dividend yield of 1.2%. A. O. Smith pays an annual dividend of $1.44 per share and has a dividend yield of 2.3%. Franklin Electric pays out 34.5% of its earnings in the form of a dividend. A. O. Smith pays out 38.8% 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. Franklin Electric has raised its dividend for 33 consecutive years and A. O. Smith has raised its dividend for 31 consecutive years.

Analyst Ratings

This is a summary of current ratings and target prices for Franklin Electric and A. O. Smith, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Franklin Electric	0	2	0	0	2.00
A. O. Smith	0	6	2	0	2.25

Franklin Electric currently has a consensus price target of $112.00, suggesting a potential upside of 23.81%. A. O. Smith has a consensus price target of $76.71, suggesting a potential upside of 20.59%. Given Franklin Electric’s higher possible upside, equities analysts plainly believe Franklin Electric is more favorable than A. O. Smith.

Institutional & Insider Ownership

80.0% of Franklin Electric shares are held by institutional investors. Comparatively, 76.1% of A. O. Smith shares are held by institutional investors. 2.7% of Franklin Electric shares are held by insiders. Comparatively, 0.8% of A. O. Smith shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Summary

A. O. Smith beats Franklin Electric on 11 of the 17 factors compared between the two stocks.

About Franklin Electric

Franklin Electric Co., Inc., together with its subsidiaries, designs, manufactures, and distributes water and fuel pumping systems worldwide. The company operates through Water Systems, Fueling Systems, and Distribution segments. The Water Systems segment offers submersible motors, drives, pumps, electronic controls, water treatment systems, monitoring devices, and related parts and equipment. Its motors and pumps are used principally for pumping clean water and wastewater in various residential, agricultural, municipal, and industrial applications; and manufactures electronic drives and controls that are used in motors for controlling functionality, as well as provides protection from various hazards, such as electrical surges, over-heating, and dry wells or tanks. The Fueling Systems segment provides pumps, pipes, sumps, fittings, vapor recovery components, electronic controls, monitoring devices, and related parts and equipment primarily for use in fueling system applications. This segment serves other energy markets, such as power reliability systems, as well as includes electronic devices for online monitoring of the power utility, hydroelectric, and telecommunication and data center infrastructure. The Distribution segment sells to and provides presale support and specifications to the installing contractors. It sells products produced by the Water Systems segment. The company sells its products to wholesale and retail distributors, specialty distributors, original equipment manufacturers, industrial and petroleum equipment distributors, and oil and utility companies through its employee sales force and independent manufacturing representatives. Franklin Electric Co., Inc. was founded in 1944 and is headquartered in Fort Wayne, Indiana.

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.