Meritor (NASDAQ: CAAS) and China Automotive Systems (NASDAQ:CAAS) are both small-cap auto/tires/trucks companies, but which is the better stock? We will compare the two businesses based on the strength of their dividends, institutional ownership, risk, valuation, earnings, profitability and analyst recommendations.

Profitability

This table compares Meritor and China Automotive Systems’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Meritor 8.06% 88.32% 9.93%
China Automotive Systems -5.52% 3.39% 1.53%

Analyst Recommendations

This is a summary of recent ratings and target prices for Meritor and China Automotive Systems, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Meritor 0 4 6 0 2.60
China Automotive Systems 0 0 0 0 N/A

Meritor presently has a consensus target price of $28.85, suggesting a potential upside of 35.07%. Given Meritor’s higher possible upside, analysts clearly believe Meritor is more favorable than China Automotive Systems.

Institutional & Insider Ownership

91.0% of Meritor shares are held by institutional investors. Comparatively, 3.7% of China Automotive Systems shares are held by institutional investors. 2.3% of Meritor shares are held by insiders. Comparatively, 62.2% of China Automotive Systems shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock is poised for long-term growth.

Valuation and Earnings

This table compares Meritor and China Automotive Systems’ revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Meritor $3.35 billion 0.55 $324.00 million $1.88 11.36
China Automotive Systems $499.06 million 0.25 -$19.34 million $0.64 6.11

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

Risk and Volatility

Meritor has a beta of 2.41, meaning that its share price is 141% more volatile than the S&P 500. Comparatively, China Automotive Systems has a beta of 1.67, meaning that its share price is 67% more volatile than the S&P 500.

Summary

Meritor beats China Automotive Systems on 12 of the 13 factors compared between the two stocks.

Meritor Company Profile

Meritor, Inc. designs, develops, manufactures, markets, distributes, sells, services, and supports integrated systems, modules, and components to original equipment manufacturers (OEMs) and the aftermarket for the commercial vehicle, transportation, and industrial sectors. It operates through two segments, Commercial Truck & Industrial; and Aftermarket & Trailer. The Commercial Truck & Industrial segment supplies drivetrain systems and components, including axles, drivelines, and braking and suspension systems primarily for medium-and heavy-duty trucks, off-highway, military, construction, bus and coach, fire and emergency, and other applications. This segment also engages in aftermarket business. The Aftermarket & Trailer segment supplies axles, brakes, drivelines, suspension parts, and other replacement and remanufactured parts to commercial vehicle aftermarket customers. This segment also offers various undercarriage products and systems for trailer applications. The company sells its products under the Meritor, Euclid, Trucktechnic, Meritor Green, Mach, and Meritor AllFit brands primarily to OEMs and its parts marketing operations, and dealers, as well as for other independent distributors and service garages in the aftermarket industry in North America, South America, Europe, and the Asia Pacific. The company was formerly known as ArvinMeritor, Inc. and changed its name to Meritor, Inc. in March 2011. Meritor, Inc. was founded in 1921 and is headquartered in Troy, Michigan.

China Automotive Systems Company Profile

China Automotive Systems, Inc., through its subsidiaries, manufactures and sells automotive systems and components in the People's Republic of China. The company produces rack and pinion power steering gears for cars and light duty vehicles; integral power steering gears for heavy-duty vehicles; power steering parts for light duty vehicles; sensor modules; automobile steering systems and columns; and automobile electronic systems and parts. It is also involved in the marketing of automotive parts in North America and Brazil, as well as the provision of after sales, and research and development support services. The company primarily sells its products to the original equipment manufacturing customers. China Automotive Systems, Inc. was founded in 2003 and is headquartered in Jing Zhou, the People's Republic of China.

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