Simpson Manufacturing (NYSE: SSD) and Snap-on (NYSE:SNA) are both mid-cap construction companies, but which is the better business? We will compare the two companies based on the strength of their valuation, institutional ownership, earnings, profitability, risk, analyst recommendations and dividends.

Profitability

This table compares Simpson Manufacturing and Snap-on’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Simpson Manufacturing 9.48% 9.64% 8.30%
Snap-on 15.13% 20.54% 11.60%

Analyst Ratings

This is a breakdown of recent recommendations and price targets for Simpson Manufacturing and Snap-on, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Simpson Manufacturing 0 2 1 0 2.33
Snap-on 0 2 5 0 2.71

Simpson Manufacturing presently has a consensus target price of $63.33, indicating a potential upside of 12.49%. Snap-on has a consensus target price of $193.00, indicating a potential upside of 32.59%. Given Snap-on’s stronger consensus rating and higher possible upside, analysts clearly believe Snap-on is more favorable than Simpson Manufacturing.

Valuation & Earnings

This table compares Simpson Manufacturing and Snap-on’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Simpson Manufacturing $977.03 million 2.69 $92.61 million $1.98 28.43
Snap-on $3.69 billion 2.24 $557.70 million $10.12 14.38

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

Institutional & Insider Ownership

88.5% of Simpson Manufacturing shares are owned by institutional investors. Comparatively, 99.4% of Snap-on shares are owned by institutional investors. 0.4% of Simpson Manufacturing shares are owned by insiders. Comparatively, 4.0% of Snap-on shares are owned by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Dividends

Simpson Manufacturing pays an annual dividend of $0.84 per share and has a dividend yield of 1.5%. Snap-on pays an annual dividend of $3.28 per share and has a dividend yield of 2.3%. Simpson Manufacturing pays out 42.4% of its earnings in the form of a dividend. Snap-on pays out 32.4% 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. Simpson Manufacturing has increased its dividend for 4 consecutive years and Snap-on has increased its dividend for 8 consecutive years. Snap-on is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Volatility and Risk

Simpson Manufacturing has a beta of 1.48, suggesting that its stock price is 48% more volatile than the S&P 500. Comparatively, Snap-on has a beta of 1.16, suggesting that its stock price is 16% more volatile than the S&P 500.

Summary

Snap-on beats Simpson Manufacturing on 14 of the 17 factors compared between the two stocks.

Simpson Manufacturing Company Profile

Simpson Manufacturing Co., Inc., through its subsidiaries, designs, engineers, manufactures, and sells building construction products. The company offers wood construction products, including connectors, truss plates, fastening systems, fasteners, and pre-fabricated lateral systems used in light-frame construction; and concrete construction products comprising adhesives, specialty chemicals, mechanical anchors, carbide drill bits, powder actuated tools, and fiber reinforced materials for use in concrete, masonry, and steel construction, as well as for concrete repair, protection, and strengthening applications. It also provides connectors for wood framing and cold formed steel applications; screws, tools, and products for deck, fascia, and drywall applications; mechanical anchors and epoxy adhesives; fiber reinforced cementitious mortar products; and decorative hardware and connectors for outdoor living spaces. The company markets its products to the residential construction, light industrial and commercial construction, remodeling, and do-it-yourself markets in the United States, Canada, France, the United Kingdom, Germany, Denmark, Switzerland, Portugal, Poland, the Netherlands, Belgium, Sweden, Norway, Australia, New Zealand, South Africa, China, Taiwan, and Vietnam, as well as in Mexico, Chile, and the Middle East. Simpson Manufacturing Co., Inc. was founded in 1956 and is headquartered in Pleasanton, California.

Snap-on Company Profile

Snap-on Incorporated manufactures and markets tools, equipment, diagnostics, and repair information and systems solutions for professional users worldwide. The company operates through Commercial & Industrial Group, Snap-on Tools Group, Repair Systems & Information Group, and Financial Services segments. It offers hand tools, including wrenches, sockets, pliers, screwdrivers, punches and chisels, saws and cutting tools, pruning tools, torque measuring instruments, and other products; power tools, such as cordless, pneumatic, hydraulic, and corded tools; and tool storage products comprising tool chests, roll cabinets, and other products. The company also provides handheld and PC-based diagnostic products, service and repair information products, diagnostic software solutions, electronic parts catalogs, business management systems and services, point-of-sale systems, integrated systems for vehicle service shops, original equipment manufacturer purchasing facilitation services, and warranty management systems and analytics. In addition, it offers solutions for the service of vehicles and industrial equipment, such as wheel alignment equipment, wheel balancers, tire changers, vehicle lifts, test lane systems, collision repair equipment, vehicle air conditioning service equipment, brake service equipment, fluid exchange equipment, transmission troubleshooting equipment, safety testing equipment, battery chargers, and hoists. Further, the company provides financing programs to facilitate the sales of its products and support its franchise business. It serves aviation and aerospace, agriculture, construction, government and military, mining, natural resources, power generation, and technical education industries, as well as vehicle dealerships and repair centers. Snap-on Incorporated was founded in 1920 and is headquartered in Kenosha, Wisconsin.

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