Financial Analysis: SMC (OTCMKTS:SMCAY) vs. Rockwell Automation (NYSE:ROK)

Rockwell Automation (NYSE:ROK) and SMC (OTCMKTS:SMCAY) are both large-cap computer and technology companies, but which is the better business? We will compare the two businesses based on the strength of their valuation, risk, analyst recommendations, earnings, dividends, institutional ownership and profitability.

Dividends

Rockwell Automation pays an annual dividend of $5.52 per share and has a dividend yield of 1.6%. SMC pays an annual dividend of $0.19 per share and has a dividend yield of 1.0%. Rockwell Automation pays out 63.2% of its earnings in the form of a dividend. SMC pays out 22.6% 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. Rockwell Automation has increased its dividend for 15 consecutive years. Rockwell Automation is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Institutional & Insider Ownership

75.8% of Rockwell Automation shares are held by institutional investors. Comparatively, 1.0% of SMC shares are held by institutional investors. 0.8% of Rockwell Automation shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Analyst Ratings

This is a summary of recent ratings for Rockwell Automation and SMC, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Rockwell Automation	0	11	9	2	2.59
SMC	0	0	0	1	4.00

Rockwell Automation presently has a consensus target price of $418.33, indicating a potential upside of 17.83%. Given Rockwell Automation’s higher probable upside, analysts clearly believe Rockwell Automation is more favorable than SMC.

Profitability

This table compares Rockwell Automation and SMC’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Rockwell Automation	11.56%	34.92%	11.53%
SMC	19.41%	7.80%	7.08%

Earnings and Valuation

This table compares Rockwell Automation and SMC”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Rockwell Automation	$8.57 billion	4.66	$869.00 million	$8.74	40.62
SMC	$5.20 billion	4.81	$1.03 billion	$0.84	23.33

SMC has lower revenue, but higher earnings than Rockwell Automation. SMC is trading at a lower price-to-earnings ratio than Rockwell Automation, indicating that it is currently the more affordable of the two stocks.

Risk and Volatility

Rockwell Automation has a beta of 1.53, suggesting that its stock price is 53% more volatile than the S&P 500. Comparatively, SMC has a beta of 0.93, suggesting that its stock price is 7% less volatile than the S&P 500.

Summary

Rockwell Automation beats SMC on 13 of the 18 factors compared between the two stocks.

About Rockwell Automation

Rockwell Automation, Inc. provides industrial automation and digital transformation solutions in North America, Europe, the Middle East, Africa, the Asia Pacific, and Latin America. The company operates through three segments, Intelligent Devices, Software & Control, and Lifecycle Services. Its solutions include hardware and software products and services. The Intelligent Devices segment offers drives, motion, safety, sensing, industrial components, and configured-to-order products. The Software & Control segment provides control and visualization software and hardware, information software, and network and security infrastructure solutions. The Lifecycle Services segment provides consulting, professional services and solutions, and connected and maintenance services. The company sells its solutions primarily through independent distributors in relation with its direct sales force. It serves discrete end markets, including automotive, semiconductor, and warehousing and logistics, as well as general industries comprising printing and publishing, marine, glass, fiber and textiles, airports, and aerospace; hybrid end markets, such as food and beverage, life sciences, household and personal care, and tire, as well as eco industrial, including water/wastewater, waste management, mass transit, and renewable energy; and process end markets comprising oil and gas, mining, metals, chemicals, pulp and paper, and others. Rockwell Automation, Inc. was founded in 1903 and is headquartered in Milwaukee, Wisconsin.

About SMC

SMC Corporation manufactures, processes, and sells automatic control equipment, sintered filters, and various types of filtration equipment worldwide. The company offers air management system, directional control valves, air cylinders, rotatory actuators/air grippers, electric actuators/cylinders, fitting and tubing, and modular F.R.L./pressure control equipment, as well as vacuum, air preparation, and lubrication equipment. It also provides flow control equipment, speed controllers, silencers/exhaust/blow guns/pressure gauges, switches/sensors/controllers, static neutralization equipment, and industrial device communication equipment/wireless system. In addition, the company offers process valves, chemical liquid valves/fittings and needle valves/tubing, process pumps, temperature control equipment, and process gas equipment, as well as high vacuum equipment, industrial filters/sintered metal elements, and pneumatic instrumentation and hydraulic equipment. The company was formerly known as Shoketsu Kinzoku Kogyo Co., Ltd. and changed its name to SMC Corporation in April 1986. SMC Corporation was incorporated in 1959 and is headquartered in Tokyo, Japan.