Financial Comparison: A. O. Smith (NYSE:AOS) & Allegion (NYSE:ALLE)

Allegion (NYSE:ALLE) and A. O. Smith (NYSE:AOS) are both industrials companies, but which is the superior stock? We will contrast the two companies based on the strength of their risk, analyst recommendations, dividends, earnings, profitability, valuation and institutional ownership.

Valuation and Earnings

This table compares Allegion and A. O. Smith”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Allegion	$4.07 billion	3.41	$643.80 million	$7.62	21.38
A. O. Smith	$3.83 billion	2.26	$546.20 million	$3.60	17.72

Allegion has higher revenue and earnings than A. O. Smith. A. O. Smith is trading at a lower price-to-earnings ratio than Allegion, indicating that it is currently the more affordable of the two stocks.

Institutional and Insider Ownership

92.2% of Allegion shares are owned by institutional investors. Comparatively, 76.1% of A. O. Smith shares are owned by institutional investors. 0.6% of Allegion shares are owned by insiders. Comparatively, 0.5% of A. O. Smith shares are owned by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company is poised for long-term growth.

Analyst Recommendations

This is a breakdown of current recommendations and price targets for Allegion and A. O. Smith, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Allegion	0	8	2	1	2.36
A. O. Smith	2	5	2	0	2.00

Allegion currently has a consensus price target of $164.75, suggesting a potential upside of 1.11%. A. O. Smith has a consensus price target of $67.75, suggesting a potential upside of 6.20%. Given A. O. Smith’s higher possible upside, analysts clearly believe A. O. Smith is more favorable than Allegion.

Volatility & Risk

Allegion has a beta of 0.84, meaning that its share price is 16% less volatile than the S&P 500. Comparatively, A. O. Smith has a beta of 1.17, meaning that its share price is 17% more volatile than the S&P 500.

Profitability

This table compares Allegion and A. O. Smith’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Allegion	15.36%	35.41%	13.80%
A. O. Smith	13.15%	27.88%	15.21%

Dividends

Allegion pays an annual dividend of $2.20 per share and has a dividend yield of 1.4%. A. O. Smith pays an annual dividend of $1.44 per share and has a dividend yield of 2.3%. Allegion pays out 28.9% of its earnings in the form of a dividend. A. O. Smith pays out 40.0% 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. Allegion has increased its dividend for 11 consecutive years and A. O. Smith has increased its dividend for 31 consecutive years. A. O. Smith is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

Allegion beats A. O. Smith on 12 of the 17 factors compared between the two stocks.

About Allegion

Allegion plc manufactures and sells mechanical and electronic security products and solutions worldwide. The company offers door controls and systems and exit devices; locks, locksets, portable locks, and key systems and services; electronic security products and access control systems; time, attendance, and workforce productivity systems; doors, accessories, and other. It also provides services and software, which includes inspection, maintenance, and repair services for its automatic entrance solutions; and software as a service, including access control, IoT integration, and workforce management solutions, as well as aftermarket services, design and installation offerings, and locksmith services. The company sells its products and solutions to end-users in commercial, institutional, and residential facilities, including education, healthcare, government, hospitality, retail, commercial office, and single and multi-family residential markets under the CISA, Interflex, LCN, Schlage, SimonsVoss, and Von Duprin brands. It sells its products and solutions through distribution and retail channels, such as specialty distribution, e-commerce, and wholesalers, as well as through various retail channels comprising do-it-yourself home improvement centers, online and e-commerce platforms, and small specialty showroom outlets. Allegion plc was incorporated in 2013 and is headquartered in Dublin, Ireland.

About A. O. Smith

A. O. Smith Corporation manufactures and markets residential and commercial gas and electric water heaters, boilers, heat pumps, tanks, and water treatment products in North America, China, Europe, and India. The company offers water heaters for residences, restaurants, hotels, office buildings, laundries, car washes, and small businesses; boilers for hospitals, schools, hotels, and other large commercial buildings, as well as homes, apartments, and condominiums; and water treatment products comprising point-of-entry water softeners, well water solutions, and whole-home water filtration products, and point-of-use carbon and reverse osmosis products for residences, restaurants, hotels, and offices. It also provides commercial water treatment and filtration product; expansion tanks, commercial solar water heating systems, swimming pool and spa heaters, and related products and parts; and electric wall-hung, gas tankless, combi-boiler, and heat pump and solar water heaters. The company offers its products under the A. O. Smith, State, Lochinvar, Hague, Water-Right, Master Water, Atlantic Filter, and Water Tec brands. It distributes its products through independent wholesale plumbing distributors, as well as to retail channels consisting of hardware and home center chains, and manufacturer representative firms; and offers Aquasana branded products directly to consumers through e-commerce channels. A. O. Smith Corporation was founded in 1874 and is headquartered in Milwaukee, Wisconsin.