Timken (NYSE:TKR) & Highway (NASDAQ:HIHO) Critical Review

Highway (NASDAQ:HIHO) and Timken (NYSE:TKR) are both industrials companies, but which is the better investment? We will compare the two businesses based on the strength of their valuation, risk, analyst recommendations, profitability, institutional ownership, dividends and earnings.

Profitability

This table compares Highway and Timken’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Highway	-28.08%	-25.93%	-15.72%
Timken	5.43%	12.63%	6.21%

Volatility & Risk

Highway has a beta of 0.48, meaning that its share price is 52% less volatile than the S&P 500. Comparatively, Timken has a beta of 1.21, meaning that its share price is 21% more volatile than the S&P 500.

Institutional & Insider Ownership

13.2% of Highway shares are held by institutional investors. Comparatively, 89.1% of Timken shares are held by institutional investors. 32.1% of Highway shares are held by company insiders. Comparatively, 8.1% of Timken shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Analyst Recommendations

This is a summary of current ratings for Highway and Timken, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Highway	1	0	0	0	1.00
Timken	0	3	7	0	2.70

Timken has a consensus target price of $145.50, suggesting a potential upside of 22.07%. Given Timken’s stronger consensus rating and higher possible upside, analysts clearly believe Timken is more favorable than Highway.

Dividends

Highway pays an annual dividend of $0.05 per share and has a dividend yield of 5.4%. Timken pays an annual dividend of $1.44 per share and has a dividend yield of 1.2%. Highway pays out -15.6% of its earnings in the form of a dividend. Timken pays out 39.0% 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. Timken has increased its dividend for 12 consecutive years. Highway is clearly the better dividend stock, given its higher yield and lower payout ratio.

Valuation and Earnings

This table compares Highway and Timken”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Highway	$4.80 million	0.89	-$1.52 million	($0.32)	-2.89
Timken	$4.58 billion	1.80	$288.40 million	$3.69	32.30

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

Summary

Timken beats Highway on 14 of the 17 factors compared between the two stocks.

About Highway

Highway Holdings Limited, together with its subsidiaries, manufactures and supplies metal, plastic, electric, and electronic components, subassemblies, and finished products for original equipment manufacturers (OEMs) and contract manufacturers. It operates through two segments, Metal Stamping and Mechanical OEM; and Electric OEM. The company also trades in plastic injection products; and manufactures and assembles automation equipment. Its products are used in the manufacture of products, such as photocopiers, laser printers, print cartridges, electrical connectors, electrical circuits, vacuum cleaners, LED power supplies, stepping motors, pumps for dishwashers, and other washing machine components. In addition, the company assists customers in the design and development of the tooling used in the metal and plastic manufacturing process, as well as provides an array of other manufacturing and engineering services, including metal stamping, screen printing, plastic injection molding, pad printing, and electronic assembly of printed circuit boards. It operates in Hong Kong and China, Europe, North America, and other Asian countries. Highway Holdings Limited was incorporated in 1990 and is headquartered in Sheung Shui, Hong Kong.

About Timken

The Timken Company designs, manufactures, and sells engineered bearings and industrial motion products, and related services in the United States and internationally. The company's Engineered Bearings segment provides various bearing products, including tapered, spherical, and cylindrical roller bearings; plain bearings, metal-polymer bearings, and rod end bearings; radial, angular, and precision ball bearings; thrust and specialty ball bearings; journal bearings; and housed or mounted bearings. This segment serves wind energy, agriculture, construction, food and beverage, metals and mining, automotive and truck, aerospace, rail, and other industries under the Timken, GGB, and Fafnir brands. Its Industrial Motion segment offers a portfolio of engineered products comprising industrial drives, automatic lubrication systems, linear motion products and systems, chains, belts, seals, couplings, filtration systems, and industrial clutches and brakes. It also provides industrial drivetrain and bearing repairing services. This segment serves a range of industries, such as solar energy, automation, construction, agriculture and turf, passenger rail, marine, aerospace, packaging and logistics, medical, and others under the Philadelphia Gear, Cone Drive, Rollon, Nadella, Groeneveld, BEKA, Diamond, Drives, Timken Belts, Spinea, Des-Case, Lagersmit, Lovejoy, and PT Tech brands. The Timken Company was founded in 1899 and is headquartered in North Canton, Ohio.