Analyzing Ryerson (NYSE:RYZ) and Watsco (NYSE:WSO)

Ryerson (NYSE:RYZ) and Watsco (NYSE:WSO) are both industrials companies, but which is the better stock? We will compare the two companies based on the strength of their institutional ownership, risk, analyst recommendations, valuation, profitability, earnings and dividends.

Profitability

This table compares Ryerson and Watsco’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Ryerson	-0.56%	-0.62%	-0.21%
Watsco	6.53%	14.40%	10.17%

Risk & Volatility

Ryerson has a beta of 1.65, meaning that its stock price is 65% more volatile than the S&P 500. Comparatively, Watsco has a beta of 1.05, meaning that its stock price is 5% more volatile than the S&P 500.

Analyst Ratings

This is a breakdown of current ratings for Ryerson and Watsco, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Ryerson	2	1	0	0	1.33
Watsco	0	9	2	0	2.18

Watsco has a consensus price target of $395.50, indicating a potential upside of 27.14%. Given Watsco’s stronger consensus rating and higher probable upside, analysts clearly believe Watsco is more favorable than Ryerson.

Earnings and Valuation

This table compares Ryerson and Watsco”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Ryerson	$4.57 billion	0.33	-$56.40 million	($1.24)	-23.45
Watsco	$7.28 billion	1.74	$496.99 million	$11.53	26.98

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

Dividends

Ryerson pays an annual dividend of $0.75 per share and has a dividend yield of 2.6%. Watsco pays an annual dividend of $13.20 per share and has a dividend yield of 4.2%. Ryerson pays out -60.5% of its earnings in the form of a dividend. Watsco pays out 114.5% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Watsco has increased its dividend for 13 consecutive years. Watsco is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Institutional and Insider Ownership

94.8% of Ryerson shares are owned by institutional investors. Comparatively, 89.7% of Watsco shares are owned by institutional investors. 6.6% of Ryerson shares are owned by insiders. Comparatively, 12.9% of Watsco shares are owned 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

Watsco beats Ryerson on 14 of the 17 factors compared between the two stocks.

About Ryerson

Ryerson Holding Corporation, together with its subsidiaries, processes and distributes industrial metals in the United States, Canada, Mexico, and China. It offers a line of products in carbon steel, stainless steel, alloy steels, and aluminum, as well as nickel and red metals in various shapes and forms, including coils, sheets, rounds, hexagons, square and flat bars, plates, structural, and tubing. The company also provides various processing services, such as bending, beveling, blanking, blasting, burning, cutting-to-length, drilling, embossing, flattening, forming, grinding, laser cutting, machining, notching, painting, perforating, polishing, punching, rolling, sawing, scribing, shearing, slitting, stamping, tapping, threading, welding, or other techniques to process materials. It serves various industries, including commercial ground transportation, metal fabrication and machine shops, industrial machinery and equipment manufacturing, consumer durable equipment, HVAC manufacturing, construction equipment manufacturing, food processing and agricultural equipment manufacturing, and oil and gas. The company was founded in 1842 and is headquartered in Chicago, Illinois.

About Watsco

Watsco, Inc., together with its subsidiaries, engages in the distribution of air conditioning, heating, refrigeration equipment, and related parts and supplies in the United States and internationally. The company distributes equipment, including residential ducted and ductless air conditioners, such as gas, electric, and oil furnaces; commercial air conditioning and heating equipment systems; and other specialized equipment. It also offers parts comprising replacement compressors, evaporator coils, motors, and other component parts; and supplies, such as thermostats, insulation materials, refrigerants, ductworks, grills, registers, sheet metals, tools, copper tubing, concrete pads, tapes, adhesives, and other ancillary supplies, as well as plumbing and bathroom remodeling supplies. The company serves contractors and dealers that service the replacement and new construction markets for residential and light commercial central air conditioning, heating, and refrigeration systems. Watsco, Inc. was incorporated in 1956 and is headquartered in Miami, Florida.