Critical Review: Hillenbrand (NYSE:HI) and MSC Industrial Direct (NYSE:MSM)

Hillenbrand (NYSE:HI) and MSC Industrial Direct (NYSE:MSM) are both mid-cap industrials companies, but which is the better stock? We will compare the two companies based on the strength of their institutional ownership, risk, valuation, dividends, analyst recommendations, earnings and profitability.

Earnings and Valuation

This table compares Hillenbrand and MSC Industrial Direct”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Hillenbrand	$3.18 billion	0.70	-$211.00 million	($0.25)	-125.90
MSC Industrial Direct	$3.82 billion	1.25	$258.59 million	$3.54	24.25

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

Profitability

This table compares Hillenbrand and MSC Industrial Direct’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Hillenbrand	-0.63%	13.53%	3.82%
MSC Industrial Direct	5.30%	14.99%	8.39%

Risk and Volatility

Hillenbrand has a beta of 1.46, suggesting that its share price is 46% more volatile than the S&P 500. Comparatively, MSC Industrial Direct has a beta of 0.95, suggesting that its share price is 5% less volatile than the S&P 500.

Dividends

Hillenbrand pays an annual dividend of $0.90 per share and has a dividend yield of 2.9%. MSC Industrial Direct pays an annual dividend of $3.40 per share and has a dividend yield of 4.0%. Hillenbrand pays out -360.0% of its earnings in the form of a dividend. MSC Industrial Direct pays out 96.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Hillenbrand has increased its dividend for 18 consecutive years and MSC Industrial Direct has increased its dividend for 3 consecutive years.

Analyst Recommendations

This is a breakdown of recent ratings for Hillenbrand and MSC Industrial Direct, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Hillenbrand	0	5	0	0	2.00
MSC Industrial Direct	0	6	1	0	2.14

Hillenbrand currently has a consensus target price of $34.67, indicating a potential upside of 10.14%. MSC Industrial Direct has a consensus target price of $91.00, indicating a potential upside of 6.00%. Given Hillenbrand’s higher possible upside, research analysts plainly believe Hillenbrand is more favorable than MSC Industrial Direct.

Insider & Institutional Ownership

89.1% of Hillenbrand shares are held by institutional investors. Comparatively, 79.3% of MSC Industrial Direct shares are held by institutional investors. 2.0% of Hillenbrand shares are held by insiders. Comparatively, 18.3% of MSC Industrial Direct 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

MSC Industrial Direct beats Hillenbrand on 12 of the 17 factors compared between the two stocks.

About Hillenbrand

Hillenbrand, Inc. operates as an industrial company in the United States and internationally. The company operates through two segments, Advanced Process Solutions and Molding Technology Solutions. The Advanced Process Solutions segment designs, engineers, manufactures, markets, and services process and material handling equipment and systems comprising compounding, extrusion, and material handling equipment, equipment system design services, as well as offers mixing technology, ingredient automation, and portion process; and provides screening and separating equipment for various industries, including plastics, food and pharmaceuticals, chemicals, fertilizers, minerals, energy, wastewater treatment, forest products, and other general industrials. The Molding Technology Solutions segment offers injection molding and extrusion equipment; hot runner systems; process control systems; mold bases and components; maintenance and repair services; and aftermarket parts and service for various industries, including automotive, consumer goods, medical, packaging, construction, and electronics. The company was founded in 1906 and is headquartered in Batesville, Indiana.

About MSC Industrial Direct

MSC Industrial Direct Co., Inc., together with its subsidiaries, distributes metalworking and maintenance, repair, and operations (MRO) products and services in the United States, Canada, Mexico, the United Kingdom, and internationally. The company's MRO products include cutting tools, measuring instruments, tooling components, metalworking products, fasteners, flat stock products, raw materials, abrasives, machinery hand and power tools, safety and janitorial supplies, plumbing supplies, materials handling products, power transmission components, and electrical supplies. It offers stock-keeping units through its catalogs and brochures; e-commerce channels, including its website, mscdirect.com; inventory management solutions; and customer care centers, customer fulfillment centers, regional inventory centers, and warehouses. The company serves individual machine shops, manufacturing companies, and government agencies. MSC Industrial Direct Co., Inc. was founded in 1941 and is headquartered in Melville, New York.