Critical Contrast: Gorman-Rupp (NYSE:GRC) & Ferguson (NYSE:FERG)

Ferguson (NYSE:FERG) and Gorman-Rupp (NYSE:GRC) are both industrials companies, but which is the better investment? We will contrast the two businesses based on the strength of their profitability, risk, earnings, valuation, analyst recommendations, dividends and institutional ownership.

Valuation & Earnings

This table compares Ferguson and Gorman-Rupp”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Ferguson	$30.76 billion	1.49	$1.86 billion	$9.90	23.78
Gorman-Rupp	$682.39 million	2.41	$53.02 million	$2.01	31.11

Ferguson has higher revenue and earnings than Gorman-Rupp. Ferguson is trading at a lower price-to-earnings ratio than Gorman-Rupp, indicating that it is currently the more affordable of the two stocks.

Dividends

Ferguson pays an annual dividend of $3.56 per share and has a dividend yield of 1.5%. Gorman-Rupp pays an annual dividend of $0.76 per share and has a dividend yield of 1.2%. Ferguson pays out 36.0% of its earnings in the form of a dividend. Gorman-Rupp pays out 37.8% 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. Gorman-Rupp has raised its dividend for 52 consecutive years. Ferguson is clearly the better dividend stock, given its higher yield and lower payout ratio.

Analyst Recommendations

This is a summary of current recommendations and price targets for Ferguson and Gorman-Rupp, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Ferguson	0	5	10	2	2.82
Gorman-Rupp	0	0	1	0	3.00

Ferguson currently has a consensus target price of $268.93, suggesting a potential upside of 14.24%. Given Ferguson’s higher possible upside, equities analysts plainly believe Ferguson is more favorable than Gorman-Rupp.

Profitability

This table compares Ferguson and Gorman-Rupp’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Ferguson	6.93%	40.37%	13.36%
Gorman-Rupp	7.77%	14.06%	6.52%

Insider & Institutional Ownership

82.0% of Ferguson shares are held by institutional investors. Comparatively, 59.3% of Gorman-Rupp shares are held by institutional investors. 0.2% of Ferguson shares are held by company insiders. Comparatively, 7.4% of Gorman-Rupp shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock will outperform the market over the long term.

Risk and Volatility

Ferguson has a beta of 1.21, suggesting that its share price is 21% more volatile than the S&P 500. Comparatively, Gorman-Rupp has a beta of 1.26, suggesting that its share price is 26% more volatile than the S&P 500.

Summary

Ferguson beats Gorman-Rupp on 11 of the 18 factors compared between the two stocks.

About Ferguson

Ferguson Enterprises Inc. distributes plumbing and heating products in North America. The company provides expertise, solutions, and products, including infrastructure, plumbing, appliances, fire, and fabrication, as well as heating, ventilation, and air conditioning (HVAC) to residential and non-residential customers. It also supplies specialist water and wastewater treatment products to residential, commercial, and infrastructure contractors, as well as supplies pipe, valves, and fittings solutions to industrial customers. In addition, it offers customized solutions, such as virtual design, fabrication, valve actuation, pre-assembly, kitting, installation, and project management services, as well as after-sales support that comprises warranty, credit, project-based billing, returns and maintenance, and repair and operations support. The company sells its products through a network of distribution centers, branches, counter service and specialist sales associates, showroom consultants, and e-commerce channels. Ferguson Enterprises Inc. was founded in 1953 and is headquartered in Newport News, Virginia.

About Gorman-Rupp

The Gorman-Rupp Company designs, manufactures, and sells pumps and pump systems in the United States and internationally. The company’s products include self-priming centrifugal, standard centrifugal, magnetic drive centrifugal, axial and mixed flow, vertical turbine line shaft, submersible, high-pressure booster, rotary gear, diaphragm, bellows, and oscillating pumps. Its products are used in water, wastewater, construction, dewatering, industrial, petroleum, original equipment, agriculture, fire suppression, heating, ventilating and air conditioning, military, and other liquid-handling applications. The company markets its products through a network of distributors, manufacturers’ representatives, third-party distributor catalogs, direct sales, and e-commerce. The Gorman-Rupp Company was founded in 1933 and is headquartered in Mansfield, Ohio.