Smith (A.O.) Corporation (NYSE: AOS) and NL Industries (NYSE:NL) are both industrial products companies, but which is the superior business? We will contrast the two businesses based on the strength of their profitability, analyst recommendations, institutional ownership, dividends, risk, earnings and valuation.

Risk & Volatility

Smith (A.O.) Corporation has a beta of 1.51, suggesting that its share price is 51% more volatile than the S&P 500. Comparatively, NL Industries has a beta of 2.68, suggesting that its share price is 168% more volatile than the S&P 500.

Profitability

This table compares Smith (A.O.) Corporation and NL Industries’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Smith (A.O.) Corporation 12.10% 22.25% 11.89%
NL Industries 57.98% 32.04% 16.44%

Institutional & Insider Ownership

74.6% of Smith (A.O.) Corporation shares are owned by institutional investors. Comparatively, 6.6% of NL Industries shares are owned by institutional investors. 1.3% of Smith (A.O.) Corporation shares are owned by insiders. Comparatively, 0.1% of NL Industries shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Valuation and Earnings

This table compares Smith (A.O.) Corporation and NL Industries’ gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Smith (A.O.) Corporation $2.86 billion 3.27 $549.50 million $1.97 27.18
NL Industries $114.72 million 3.14 $7.92 million $1.37 5.40

Smith (A.O.) Corporation has higher revenue and earnings than NL Industries. NL Industries is trading at a lower price-to-earnings ratio than Smith (A.O.) Corporation, indicating that it is currently the more affordable of the two stocks.

Analyst Ratings

This is a summary of recent recommendations and price targets for Smith (A.O.) Corporation and NL Industries, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Smith (A.O.) Corporation 0 1 3 0 2.75
NL Industries 1 0 0 0 1.00

Smith (A.O.) Corporation presently has a consensus target price of $69.25, suggesting a potential upside of 29.34%. NL Industries has a consensus target price of $6.00, suggesting a potential downside of 18.92%. Given Smith (A.O.) Corporation’s stronger consensus rating and higher possible upside, research analysts clearly believe Smith (A.O.) Corporation is more favorable than NL Industries.

Dividends

Smith (A.O.) Corporation pays an annual dividend of $0.56 per share and has a dividend yield of 1.0%. NL Industries does not pay a dividend. Smith (A.O.) Corporation pays out 28.4% of its earnings in the form of a dividend. Smith (A.O.) Corporation has increased its dividend for 11 consecutive years.

Summary

Smith (A.O.) Corporation beats NL Industries on 12 of the 17 factors compared between the two stocks.

Smith (A.O.) Corporation Company Profile

A. O. Smith Corporation operates through two segments: North America and Rest of World. The Company’s Rest of World segment primarily consists of China, Europe and India. Both segments manufacture and market comprehensive lines of residential and commercial gas, gas tankless and electric water heaters, as well as water treatment products. Both segments primarily manufacture and market in their respective regions of the world. Its North America segment manufactures and globally markets specialty commercial water heating equipment, condensing and non-condensing boilers and water systems tanks. It also manufactures and markets in-home air purification products in China. It serves residential and commercial end markets in North America with a range of products, which include water heaters, boilers and other. It supplies water heaters to the residential market in China with a broad product offering, including electric, gas, gas tankless, heat pump and solar units, as well as combi boilers.

NL Industries Company Profile

NL Industries, Inc. is a holding company. The Company operates in the component products industry through its subsidiary, CompX International Inc. (CompX). The Company operates in the chemicals industry through its non-controlling interest in Kronos Worldwide, Inc. (Kronos). The Company, through Compx, manufactures engineered components that are sold to a range of industries, including recreational transportation (including boats), postal, office and institutional furniture, cabinetry, tool storage, healthcare, gas stations and vending equipment. Kronos is a global producer and marketer of value-added titanium dioxide pigments (TiO2), a base industrial product used in imparting whiteness, brightness and opacity to a range of customer applications and end use markets, including coatings, plastics, paper, inks, food, cosmetics, and other industrial and consumer products. Kronos has production facilities in Europe and North America.

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