Reviewing Watts Water Technologies (NYSE:WTS) & Armstrong World Industries (NYSE:AWI)

Armstrong World Industries (NYSE:AWI) and Watts Water Technologies (NYSE:WTS) are both industrials companies, but which is the better business? We will compare the two businesses based on the strength of their dividends, earnings, profitability, valuation, analyst recommendations, institutional ownership and risk.

Risk and Volatility

Armstrong World Industries has a beta of 1.16, suggesting that its share price is 16% more volatile than the S&P 500. Comparatively, Watts Water Technologies has a beta of 1.15, suggesting that its share price is 15% more volatile than the S&P 500.

Profitability

This table compares Armstrong World Industries and Watts Water Technologies’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Armstrong World Industries	18.60%	37.35%	17.06%
Watts Water Technologies	14.34%	19.16%	13.78%

Institutional and Insider Ownership

98.9% of Armstrong World Industries shares are owned by institutional investors. Comparatively, 95.0% of Watts Water Technologies shares are owned by institutional investors. 1.2% of Armstrong World Industries shares are owned by company insiders. Comparatively, 1.0% of Watts Water Technologies shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Valuation and Earnings

This table compares Armstrong World Industries and Watts Water Technologies”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Armstrong World Industries	$1.62 billion	4.78	$308.70 million	$7.30	25.09
Watts Water Technologies	$2.68 billion	4.79	$340.80 million	$11.45	33.53

Watts Water Technologies has higher revenue and earnings than Armstrong World Industries. Armstrong World Industries is trading at a lower price-to-earnings ratio than Watts Water Technologies, indicating that it is currently the more affordable of the two stocks.

Dividends

Armstrong World Industries pays an annual dividend of $1.36 per share and has a dividend yield of 0.7%. Watts Water Technologies pays an annual dividend of $2.52 per share and has a dividend yield of 0.7%. Armstrong World Industries pays out 18.6% of its earnings in the form of a dividend. Watts Water Technologies pays out 22.0% 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. Armstrong World Industries has increased its dividend for 1 consecutive years and Watts Water Technologies has increased its dividend for 13 consecutive years. Armstrong World Industries is clearly the better dividend stock, given its higher yield and lower payout ratio.

Analyst Recommendations

This is a summary of recent ratings and recommmendations for Armstrong World Industries and Watts Water Technologies, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Armstrong World Industries	0	3	5	1	2.78
Watts Water Technologies	0	6	5	0	2.45

Armstrong World Industries currently has a consensus target price of $213.00, suggesting a potential upside of 16.29%. Watts Water Technologies has a consensus target price of $367.70, suggesting a potential downside of 4.22%. Given Armstrong World Industries’ stronger consensus rating and higher possible upside, equities research analysts plainly believe Armstrong World Industries is more favorable than Watts Water Technologies.

Summary

Armstrong World Industries beats Watts Water Technologies on 11 of the 17 factors compared between the two stocks.

About Armstrong World Industries

Armstrong World Industries, Inc., together with its subsidiaries, engages in the design, manufacture, and sale of ceiling and wall solutions in the Americas. It operates through Mineral Fiber and Architectural Specialties segments. The company offers mineral fiber, fiberglass wool, metal, wood, felt, wood fiber, and glass-reinforced-gypsum; ceiling component products, such as ceiling perimeters and trims, as well as grid products that support drywall ceiling systems; ceilings, walls, and facades for use in commercial settings; and manufactures ceiling suspension system (grid) products. It serves commercial and residential construction markets, as well as renovation of existing buildings sectors. The company sells its products to resale distributors, ceiling system contractors, wholesalers, and retailers comprising large home centers. Armstrong World Industries, Inc. was founded in 1860 and is headquartered in Lancaster, Pennsylvania.

About Watts Water Technologies

Watts Water Technologies, Inc., together with its subsidiaries, supplies products and solutions that manage and conserve the flow of fluids and energy into, through, and out of buildings in the commercial, industrial, and residential markets in the Americas, Europe, the Asia-Pacific, the Middle East, and Africa. The company offers residential and commercial flow control and protection products, including backflow preventers, water pressure regulators, temperature and pressure relief valves, thermostatic mixing valves, leak detection and protection products, commercial washroom solutions, and emergency safety products and equipment for plumbing and hot water applications. It also provides heating, ventilation, and air conditioning and gas products comprising commercial boilers; water heaters and heating solutions; hydronic and electric heating systems for under-floor radiant applications; custom heat and hot water solutions; hydronic pump groups for boiler manufacturers and alternative energy control packages; and flexible stainless-steel connectors for natural and liquid propane gas in commercial food service and residential applications. In addition, the company offers drainage and water re-use products, such as drainage products, engineered rainwater harvesting solutions for commercial, industrial, marine, and residential applications; connected roof drain systems; and water quality products that include point-of-use and point-of-entry water filtration, conditioning, and scale prevention systems for commercial, marine, and residential applications. The company sells its products to plumbing, heating, and mechanical wholesale distributors and dealers; original equipment manufacturers; specialty product distributors; and do-it-yourself and retail chains, as well as wholesalers and private label accounts. Watts Water Technologies, Inc. was founded in 1874 and is headquartered in North Andover, Massachusetts.