Kadant (NYSE: KAI) and Altra Industrial Motion Corp. (NASDAQ:AIMC) are both small-cap industrial products companies, but which is the superior business? We will contrast the two businesses based on the strength of their institutional ownership, profitabiliy, earnings, risk, dividends, valuation and analyst recommendations.

Dividends

Kadant pays an annual dividend of $0.84 per share and has a dividend yield of 1.0%. Altra Industrial Motion Corp. pays an annual dividend of $0.68 per share and has a dividend yield of 1.6%. Kadant pays out 27.7% of its earnings in the form of a dividend. Altra Industrial Motion Corp. pays out 59.1% 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. Kadant has increased its dividend for 3 consecutive years.

Valuation and Earnings

This table compares Kadant and Altra Industrial Motion Corp.’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Kadant $418.86 million 2.25 $62.16 million $3.03 28.28
Altra Industrial Motion Corp. $784.57 million 1.64 $110.94 million $1.15 38.13

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

Analyst Ratings

This is a breakdown of current recommendations and price targets for Kadant and Altra Industrial Motion Corp., as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Kadant 0 0 4 0 3.00
Altra Industrial Motion Corp. 0 1 2 0 2.67

Kadant currently has a consensus price target of $72.00, indicating a potential downside of 15.99%. Altra Industrial Motion Corp. has a consensus price target of $46.50, indicating a potential upside of 6.04%. Given Altra Industrial Motion Corp.’s higher possible upside, analysts clearly believe Altra Industrial Motion Corp. is more favorable than Kadant.

Profitability

This table compares Kadant and Altra Industrial Motion Corp.’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Kadant 8.10% 12.92% 7.78%
Altra Industrial Motion Corp. 4.17% 16.50% 6.29%

Insider and Institutional Ownership

91.5% of Kadant shares are owned by institutional investors. Comparatively, 98.2% of Altra Industrial Motion Corp. shares are owned by institutional investors. 5.6% of Kadant shares are owned by company insiders. Comparatively, 3.2% of Altra Industrial Motion Corp. shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Risk and Volatility

Kadant has a beta of 1.36, indicating that its stock price is 36% more volatile than the S&P 500. Comparatively, Altra Industrial Motion Corp. has a beta of 1.67, indicating that its stock price is 67% more volatile than the S&P 500.

Summary

Kadant beats Altra Industrial Motion Corp. on 10 of the 17 factors compared between the two stocks.

Kadant Company Profile

Kadant Inc. is a supplier of equipment and components used in process industries. In addition, the Company manufactures granules made from papermaking by-products. Its segments include Papermaking Systems and Wood Processing Systems. The Company has a customer base, which includes paper and oriented strand board (OSB) manufacturers. Papermaking Systems segment is engaged in developing, manufacturing, and marketing equipment for the global papermaking and paper recycling industries. Its Papermaking Systems segment consists of product lines, including Stock-Preparation; Doctoring, Cleaning, & Filtration, and Fluid-Handling. The Company develops, manufactures and markets stranders and related equipment used in the production of OSB.

Altra Industrial Motion Corp. Company Profile

Altra Industrial Motion Corp. is a designer, producer and marketer of a range of mechanical power transmission (MPT) components. The Company operates through three segments: Couplings, Clutches and Brakes; Electromagnetic Clutches and Brakes, and Gearing. It manufactures a range of couplings suitable for various industrial and specialty applications. The Electromagnetic Clutches and Brakes segment products include brakes and clutches that are used to electronically slow, stop, engage or disengage equipment utilizing electromagnetic friction type connections. The Gearing segment product lines include vertical and horizontal gear drives, speed reducers and increasers, high-speed compressor drives, enclosed custom gear drives, various enclosed gear drive and gear motor configurations, and open gearing products, such as spur, helical, worm and miter/bevel gears. Its products are used to control and transmit power and torque in virtually any industrial application involving movement.

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