Head to Head Comparison: Federal Signal (NYSE:FSS) and WEG (OTCMKTS:WEGZY)

Federal Signal (NYSE:FSS) and WEG (OTCMKTS:WEGZY) are both industrials companies, but which is the superior stock? We will contrast the two businesses based on the strength of their analyst recommendations, earnings, institutional ownership, risk, valuation, dividends and profitability.

Insider and Institutional Ownership

92.7% of Federal Signal shares are owned by institutional investors. 3.3% of Federal Signal shares are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.

Earnings & Valuation

This table compares Federal Signal and WEG”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Federal Signal	$2.18 billion	3.16	$246.60 million	$4.64	24.30
WEG	$7.31 billion	5.89	$1.14 billion	$0.28	36.64

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

Dividends

Federal Signal pays an annual dividend of $0.60 per share and has a dividend yield of 0.5%. WEG pays an annual dividend of $0.05 per share and has a dividend yield of 0.5%. Federal Signal pays out 12.9% of its earnings in the form of a dividend. WEG pays out 17.9% 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. Federal Signal has raised its dividend for 3 consecutive years. Federal Signal is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Recommendations

This is a summary of current ratings and recommmendations for Federal Signal and WEG, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Federal Signal	0	2	3	1	2.83
WEG	0	2	1	0	2.33

Federal Signal presently has a consensus target price of $140.50, suggesting a potential upside of 24.60%. Given Federal Signal’s stronger consensus rating and higher probable upside, equities analysts plainly believe Federal Signal is more favorable than WEG.

Profitability

This table compares Federal Signal and WEG’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Federal Signal	11.66%	21.36%	13.07%
WEG	15.58%	31.02%	14.45%

Summary

Federal Signal beats WEG on 10 of the 17 factors compared between the two stocks.

About Federal Signal

Federal Signal Corp. engages in the design and manufacture of products and integrated solutions for municipal, governmental, industrial, and commercial customers. It operates through the Environmental Solutions Group and Safety and Security Systems Group segments. The Environment Solutions Group segment is involved in the manufacture and supply of street sweeper vehicles, sewer cleaners, vacuum loader trucks, hydro-excavation trucks, and water blasting equipment. The Safety and Security Systems Group segment offers comprehensive systems and products that law enforcement, fire rescue, emergency medical services, campuses, military facilities, and industrial sites use to protect people and property. The company was founded in 1901 and is headquartered in Oak Brook, IL.

About WEG

WEG S.A. engages in the production and sale of capital goods in Brazil and internationally. The company offers electric motors, generators, and transformers; gear units and geared motors; hydraulic and steam turbines; frequency converters; motor starters and maneuver devices; control and protection of electric circuits for industrial automation; power sockets and switches; and electric traction solutions for heavy vehicles, SUV vehicles, locomotives, and sea transportation capital goods. It also provides solutions for the generation of renewable and distributed energy through hydro, thermal, biomass, wind, and solar energy power plants; solutions for industry; UPSs and alternators for groups of generators; conventional and movable electric substations; industrial electrical and electronic systems; industrial paint and varnish; and paints for automotive repainting. WEG S.A. was founded in 1961 and is headquartered in Jaraguá do Sul, Brazil.