Head-To-Head Analysis: W.W. Grainger (NYSE:GWW) versus MSC Industrial Direct (NYSE:MSM)

MSC Industrial Direct (NYSE:MSM) and W.W. Grainger (NYSE:GWW) are both industrials companies, but which is the better stock? We will contrast the two businesses based on the strength of their risk, earnings, valuation, institutional ownership, dividends, analyst recommendations and profitability.

Dividends

MSC Industrial Direct pays an annual dividend of $3.48 per share and has a dividend yield of 4.0%. W.W. Grainger pays an annual dividend of $9.04 per share and has a dividend yield of 0.9%. MSC Industrial Direct pays out 97.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. W.W. Grainger pays out 25.4% of its earnings in the form of a dividend. MSC Industrial Direct has raised its dividend for 3 consecutive years and W.W. Grainger has raised its dividend for 55 consecutive years.

Analyst Recommendations

This is a breakdown of current ratings for MSC Industrial Direct and W.W. Grainger, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
MSC Industrial Direct	0	6	1	0	2.14
W.W. Grainger	2	6	1	0	1.89

MSC Industrial Direct currently has a consensus target price of $91.50, suggesting a potential upside of 5.09%. W.W. Grainger has a consensus target price of $1,009.43, suggesting a potential downside of 2.45%. Given MSC Industrial Direct’s stronger consensus rating and higher possible upside, research analysts plainly believe MSC Industrial Direct is more favorable than W.W. Grainger.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
MSC Industrial Direct	5.29%	15.21%	8.50%
W.W. Grainger	9.75%	49.40%	21.84%

Earnings & Valuation

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

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
MSC Industrial Direct	$3.77 billion	1.29	$199.33 million	$3.56	24.46
W.W. Grainger	$17.17 billion	2.87	$1.91 billion	$35.66	29.02

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

Institutional and Insider Ownership

79.3% of MSC Industrial Direct shares are owned by institutional investors. Comparatively, 80.7% of W.W. Grainger shares are owned by institutional investors. 19.0% of MSC Industrial Direct shares are owned by insiders. Comparatively, 6.1% of W.W. Grainger shares are owned by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Volatility and Risk

MSC Industrial Direct has a beta of 0.84, suggesting that its stock price is 16% less volatile than the S&P 500. Comparatively, W.W. Grainger has a beta of 1.11, suggesting that its stock price is 11% more volatile than the S&P 500.

Summary

W.W. Grainger beats MSC Industrial Direct on 12 of the 16 factors compared between the two stocks.

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.

About W.W. Grainger

W.W. Grainger, Inc., together with its subsidiaries, distributes maintenance, repair, and operating products and services primarily in North America, Japan, the United Kingdom, and internationally. The company operates through two segments, High-Touch Solutions N.A. and Endless Assortment. The company provides safety, security, material handling and storage equipment, pumps and plumbing equipment, cleaning and maintenance, and metalworking and hand tools. It also offers technical support and inventory management services. The company serves smaller businesses to large corporations, government entities, and other institutions, as well as commercial, healthcare, and manufacturing industries through sales and service representatives, and electronic and ecommerce channels. W.W. Grainger, Inc. was founded in 1927 and is headquartered in Lake Forest, Illinois.