Head to Head Review: Flowserve (NYSE:FLS) versus Applied Industrial Technologies (NYSE:AIT)

Applied Industrial Technologies (NYSE:AIT) and Flowserve (NYSE:FLS) are both large-cap industrials companies, but which is the better investment? We will contrast the two businesses based on the strength of their risk, profitability, valuation, analyst recommendations, dividends, earnings and institutional ownership.

Profitability

This table compares Applied Industrial Technologies and Flowserve’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Applied Industrial Technologies	8.49%	21.74%	12.78%
Flowserve	7.32%	21.19%	8.39%

Dividends

Applied Industrial Technologies pays an annual dividend of $2.04 per share and has a dividend yield of 0.7%. Flowserve pays an annual dividend of $0.84 per share and has a dividend yield of 0.9%. Applied Industrial Technologies pays out 19.4% of its earnings in the form of a dividend. Flowserve pays out 32.1% 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. Applied Industrial Technologies has raised its dividend for 16 consecutive years and Flowserve has raised its dividend for 1 consecutive years.

Earnings and Valuation

This table compares Applied Industrial Technologies and Flowserve”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Applied Industrial Technologies	$4.56 billion	2.30	$392.99 million	$10.51	26.75
Flowserve	$4.73 billion	2.48	$346.25 million	$2.62	35.17

Applied Industrial Technologies has higher earnings, but lower revenue than Flowserve. Applied Industrial Technologies is trading at a lower price-to-earnings ratio than Flowserve, indicating that it is currently the more affordable of the two stocks.

Risk and Volatility

Applied Industrial Technologies has a beta of 0.84, indicating that its share price is 16% less volatile than the S&P 500. Comparatively, Flowserve has a beta of 1.29, indicating that its share price is 29% more volatile than the S&P 500.

Institutional and Insider Ownership

93.5% of Applied Industrial Technologies shares are held by institutional investors. Comparatively, 93.9% of Flowserve shares are held by institutional investors. 1.6% of Applied Industrial Technologies shares are held by company insiders. Comparatively, 0.8% of Flowserve shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Analyst Recommendations

This is a breakdown of recent recommendations and price targets for Applied Industrial Technologies and Flowserve, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Applied Industrial Technologies	0	1	6	0	2.86
Flowserve	0	4	8	0	2.67

Applied Industrial Technologies presently has a consensus target price of $290.63, suggesting a potential upside of 3.36%. Flowserve has a consensus target price of $88.80, suggesting a potential downside of 3.62%. Given Applied Industrial Technologies’ stronger consensus rating and higher possible upside, analysts plainly believe Applied Industrial Technologies is more favorable than Flowserve.

Summary

Applied Industrial Technologies beats Flowserve on 10 of the 17 factors compared between the two stocks.

About Applied Industrial Technologies

Applied Industrial Technologies, Inc. distributes industrial motion, power, control, and automation technology solutions in North America, Australia, New Zealand, and Singapore. It operates in two segments, Service Center Based Distribution, and Engineered Solutions. The company distributes bearings, power transmission products, engineered fluid power components and systems, specialty flow control solutions, advanced automation products, industrial rubber products, linear motion components, automation solutions, tools, safety products, oilfield supplies, and other industrial and maintenance supplies; and motors, belting, drives, couplings, pumps, hydraulic and pneumatic components, filtration supplies, valves, fittings, process instrumentation, actuators, and hoses, filtration supplies, as well as other related supplies for general operational needs of customers' machinery and equipment. It also operates fabricated rubber shops and service field crews that install, modify, and repair conveyor belts and rubber linings, as well as offer hose assemblies. In addition, the company provides technical support services; engages in the distribution of fluid power and industrial flow control products; advanced automation solutions, including machine vision, robotics, motion control, and smart technologies. It distributes industrial products through a network of service centers. The company serves various industries, including agriculture and food processing, cement, chemicals and petrochemicals, fabricated metals, forest products, industrial machinery and equipment, life sciences, mining, oil and gas, primary metals, technology, transportation, and utilities, as well as government entities. The company was formerly known as Bearings, Inc. and changed its to name to Applied Industrial Technologies, Inc. in 1997. The company was founded in 1923 and is headquartered in Cleveland, Ohio.

About Flowserve

Flowserve Corporation designs, manufactures, distributes, and services industrial flow management equipment in the United States, Canada, Mexico, Europe, the Middle East, Africa, and the Asia Pacific. It operates through Flowserve Pump Division (FPD) and Flow Control Division (FCD) segments. The FPD segment offers custom and pre-configured pumps and pump systems, mechanical seals, auxiliary systems, replacement parts, upgrades, and related aftermarket services; and equipment services, including installation and commissioning services, seal systems spare parts, repairs, advanced diagnostics, re-rate and upgrade solutions, retrofit programs, and machining and asset management solutions, as well as manufactures a gas-lubricated mechanical seal for use in high-speed compressors for gas pipelines and in the oil and gas production and process markets. The FCD segment provides engineered and industrial valve and automation systems, including isolation and control valves, actuation, controls, and related equipment; and equipment maintenance services for flow control systems, including advanced diagnostics, repair, installation, commissioning, retrofit programs, and field machining capabilities. This segment's products are used to control, direct, and manage the flow of liquids, gases, and multi-phase fluids. It primarily serves oil and gas, chemical and pharmaceuticals, power generation, and water management markets, as well as general industries, including mining and ore processing, pulp and paper, food and beverage, and other smaller applications. The company distributes its products through direct sales, distributors, and sales representatives. Flowserve Corporation was founded in 1790 and is headquartered in Irving, Texas.