Kadant (NYSE: KAI) and Altra Industrial Motion Corp. (NASDAQ:AIMC) are both small-cap industrial products companies, but which is the superior investment? We will contrast the two companies based on the strength of their profitabiliy, dividends, institutional ownership, earnings, analyst recommendations, risk and valuation.

Dividends

Kadant pays an annual dividend of $0.84 per share and has a dividend yield of 1.1%. Altra Industrial Motion Corp. pays an annual dividend of $0.68 per share and has a dividend yield of 1.7%. Kadant pays out 27.5% of its earnings in the form of a dividend. Altra Industrial Motion Corp. pays out 69.4% 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. Kadant has raised its dividend for 3 consecutive years.

Analyst Ratings

This is a breakdown of current ratings and recommmendations for Kadant and Altra Industrial Motion Corp., as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Kadant 0 0 4 0 3.00
Altra Industrial Motion Corp. 0 1 2 0 2.67

Kadant presently has a consensus target price of $72.00, indicating a potential downside of 7.93%. Altra Industrial Motion Corp. has a consensus target price of $44.50, indicating a potential upside of 10.70%. Given Altra Industrial Motion Corp.’s higher possible upside, analysts plainly believe Altra Industrial Motion Corp. is more favorable than Kadant.

Profitability

This table compares Kadant and Altra Industrial Motion Corp.’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Kadant 8.12% 12.35% 7.38%
Altra Industrial Motion Corp. 3.58% 16.20% 6.14%

Earnings and Valuation

This table compares Kadant and Altra Industrial Motion Corp.’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Kadant $420.44 million 2.05 $65.08 million $3.06 25.56
Altra Industrial Motion Corp. $743.89 million 1.58 $103.11 million $0.98 41.02

Altra Industrial Motion Corp. has higher revenue and earnings than Kadant. Kadant is trading at a lower price-to-earnings ratio than Altra Industrial Motion Corp., indicating that it is currently the more affordable of the two stocks.

Risk and Volatility

Kadant has a beta of 1.35, meaning that its stock price is 35% more volatile than the S&P 500. Comparatively, Altra Industrial Motion Corp. has a beta of 1.65, meaning that its stock price is 65% more volatile than the S&P 500.

Insider and Institutional Ownership

90.0% of Kadant shares are owned by institutional investors. Comparatively, 98.3% of Altra Industrial Motion Corp. shares are owned by institutional investors. 5.6% of Kadant shares are owned by insiders. Comparatively, 3.2% of Altra Industrial Motion Corp. shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.

Summary

Kadant beats Altra Industrial Motion Corp. on 9 of the 17 factors compared between the two stocks.

About Kadant

Kadant Inc. is a supplier of equipment and components used in process industries. In addition, the Company manufactures granules made from papermaking by-products. Its segments include Papermaking Systems and Wood Processing Systems. The Company has a customer base, which includes paper and oriented strand board (OSB) manufacturers. Papermaking Systems segment is engaged in developing, manufacturing, and marketing equipment for the global papermaking and paper recycling industries. Its Papermaking Systems segment consists of product lines, including Stock-Preparation; Doctoring, Cleaning, & Filtration, and Fluid-Handling. The Company develops, manufactures and markets stranders and related equipment used in the production of OSB.

About Altra Industrial Motion Corp.

Altra Industrial Motion Corp. is a designer, producer and marketer of a range of mechanical power transmission (MPT) components. The Company operates through three segments: Couplings, Clutches and Brakes; Electromagnetic Clutches and Brakes, and Gearing. It manufactures a range of couplings suitable for various industrial and specialty applications. The Electromagnetic Clutches and Brakes segment products include brakes and clutches that are used to electronically slow, stop, engage or disengage equipment utilizing electromagnetic friction type connections. The Gearing segment product lines include vertical and horizontal gear drives, speed reducers and increasers, high-speed compressor drives, enclosed custom gear drives, various enclosed gear drive and gear motor configurations, and open gearing products, such as spur, helical, worm and miter/bevel gears. Its products are used to control and transmit power and torque in virtually any industrial application involving movement.

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