PACCAR (NASDAQ:PCAR) versus Graco (NYSE:GGG) Head to Head Review

Graco (NYSE:GGG) and PACCAR (NASDAQ:PCAR) are both large-cap industrials companies, but which is the superior investment? We will contrast the two businesses based on the strength of their risk, analyst recommendations, institutional ownership, valuation, dividends, earnings and profitability.

Dividends

Graco pays an annual dividend of $1.18 per share and has a dividend yield of 1.5%. PACCAR pays an annual dividend of $1.40 per share and has a dividend yield of 1.2%. Graco pays out 37.1% of its earnings in the form of a dividend. PACCAR pays out 29.4% 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. Graco has raised its dividend for 29 consecutive years and PACCAR has raised its dividend for 5 consecutive years. Graco is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

This table compares Graco and PACCAR’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Graco	23.53%	19.54%	15.86%
PACCAR	9.00%	12.73%	5.69%

Institutional & Insider Ownership

93.9% of Graco shares are held by institutional investors. Comparatively, 64.9% of PACCAR shares are held by institutional investors. 2.2% of Graco shares are held by insiders. Comparatively, 2.0% of PACCAR shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Valuation and Earnings

This table compares Graco and PACCAR”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Graco	$2.27 billion	5.48	$521.84 million	$3.18	24.12
PACCAR	$27.82 billion	2.17	$2.38 billion	$4.76	24.10

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

Risk and Volatility

Graco has a beta of 0.92, indicating that its stock price is 8% less volatile than the S&P 500. Comparatively, PACCAR has a beta of 0.96, indicating that its stock price is 4% less volatile than the S&P 500.

Analyst Ratings

This is a summary of recent recommendations for Graco and PACCAR, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Graco	0	5	2	0	2.29
PACCAR	0	11	3	0	2.21

Graco currently has a consensus price target of $95.00, suggesting a potential upside of 23.86%. PACCAR has a consensus price target of $133.91, suggesting a potential upside of 16.72%. Given Graco’s stronger consensus rating and higher probable upside, analysts clearly believe Graco is more favorable than PACCAR.

Summary

Graco beats PACCAR on 11 of the 17 factors compared between the two stocks.

About Graco

Graco Inc. designs, manufactures, and markets systems and equipment used to move, measure, control, dispense, and spray fluid and powder materials worldwide. The Contractor segment offers sprayers to apply paint to walls and other structures; two-component proportioning systems that are used to spray polyurethane foam and polyurea coatings; and viscous coatings to roofs, as well as markings on roads, parking lots, athletic fields, and floors. The Industrial segment provides liquid finishing equipment, paint circulating and supply pumps, paint circulating advanced control systems, plural component coating proportioners, and accessories and spare parts; equipment that pumps, meters, mixes and dispenses sealant, adhesive, and composite materials; and gel-coat equipment, chop and wet-out systems, resin transfer molding systems and applicators, and precision dispensing solutions. It also offers powder finishing products to coat powder finishing on metals under the Gema and SAT brands. The Process segment provides pumps to move and dispense chemicals, water, wastewater, petroleum, food, lubricants, and other fluids; pressure valves used in the oil and natural gas industry, other industrial processes, and research facilities; and chemical injection pumping solutions for injection of chemicals into producing oil wells and pipelines. It also supplies pumps, hose reels, meters, valves, and accessories for fast oil change facilities, service garages, fleet service centers, automobile dealerships, auto parts stores, truck builders, and heavy equipment service centers; and systems, components, and accessories for the automatic lubrication of bearings, gears, and generators in industrial and commercial equipment, compressors, turbines, and on- and off-road vehicles. It sells its products through distributors, original equipment manufacturers, and home center channels, as well as to end-users. The company was incorporated in 1926 and is headquartered in Minneapolis, Minnesota.

About PACCAR

PACCAR Inc designs, manufactures, and distributes light, medium, and heavy-duty commercial trucks in the United States, Canada, Europe, Mexico, South America, Australia, and internationally. It operates through three segments: Truck, Parts, and Financial Services. The Truck segment designs, manufactures, and distributes trucks for the over-the-road and off-highway hauling of commercial and consumer goods. It sells its trucks through a network of independent dealers under the Kenworth, Peterbilt, and DAF nameplates. The Parts segment distributes aftermarket parts for trucks and related commercial vehicles. The Financial Services segment conducts full-service leasing operations under the PacLease trade name, as well as provides finance and leasing products and services to customers and dealers. This segment also offers equipment financing and administrative support services for its franchisees; retail loan and leasing services for small, medium, and large commercial trucking companies, as well as independent owners/operators and other businesses; and truck inventory financing services to independent dealers. In addition, this segment offers loans and leases directly to customers for the acquisition of trucks and related equipment. The company also manufactures and markets industrial winches under the Braden, Carco, and Gearmatic nameplates. PACCAR Inc was founded in 1905 and is headquartered in Bellevue, Washington.