Comparing SMC (OTCMKTS:SMCAY) & Timken (NYSE:TKR)

SMC (OTCMKTS:SMCAY) and Timken (NYSE:TKR) are both computer and technology companies, but which is the superior investment? We will contrast the two businesses based on the strength of their analyst recommendations, valuation, profitability, dividends, institutional ownership, risk and earnings.

Analyst Ratings

This is a summary of current recommendations and price targets for SMC and Timken, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
SMC	0	1	0	1	3.00
Timken	0	3	6	0	2.67

Timken has a consensus target price of $139.13, suggesting a potential upside of 9.83%. Given Timken’s higher probable upside, analysts clearly believe Timken is more favorable than SMC.

Institutional and Insider Ownership

1.0% of SMC shares are held by institutional investors. Comparatively, 89.1% of Timken shares are held by institutional investors. 8.1% of Timken shares are held by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.

Valuation & Earnings

This table compares SMC and Timken”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
SMC	$5.60 billion	4.85	$1.11 billion	$0.88	24.14
Timken	$4.58 billion	1.92	$288.40 million	$4.40	28.79

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

Dividends

SMC pays an annual dividend of $0.19 per share and has a dividend yield of 0.9%. Timken pays an annual dividend of $1.44 per share and has a dividend yield of 1.1%. SMC pays out 21.6% of its earnings in the form of a dividend. Timken pays out 32.7% 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 raised its dividend for 12 consecutive years. Timken is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Volatility & Risk

SMC has a beta of 1.15, suggesting that its share price is 15% more volatile than the S&P 500. Comparatively, Timken has a beta of 1.18, suggesting that its share price is 18% more volatile than the S&P 500.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
SMC	19.84%	8.25%	7.46%
Timken	6.60%	11.84%	5.79%

Summary

Timken beats SMC on 10 of the 18 factors compared between the two stocks.

About SMC

SMC Corporation manufactures, processes, and sells automatic control equipment, sintered filters, and various types of filtration equipment worldwide. The company offers air management system, directional control valves, air cylinders, rotatory actuators/air grippers, electric actuators/cylinders, fitting and tubing, and modular F.R.L./pressure control equipment, as well as vacuum, air preparation, and lubrication equipment. It also provides flow control equipment, speed controllers, silencers/exhaust/blow guns/pressure gauges, switches/sensors/controllers, static neutralization equipment, and industrial device communication equipment/wireless system. In addition, the company offers process valves, chemical liquid valves/fittings and needle valves/tubing, process pumps, temperature control equipment, and process gas equipment, as well as high vacuum equipment, industrial filters/sintered metal elements, and pneumatic instrumentation and hydraulic equipment. The company was formerly known as Shoketsu Kinzoku Kogyo Co., Ltd. and changed its name to SMC Corporation in April 1986. SMC Corporation was incorporated in 1959 and is headquartered in Tokyo, Japan.

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.