Tower International (NYSE: TOWR) and China Automotive Systems (NASDAQ:CAAS) are both small-cap auto/tires/trucks companies, but which is the better investment? We will contrast the two businesses based on the strength of their earnings, institutional ownership, dividends, risk, valuation, profitabiliy and analyst recommendations.

Analyst Recommendations

This is a summary of recent ratings and recommmendations for Tower International and China Automotive Systems, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Tower International 0 2 2 0 2.50
China Automotive Systems 0 0 1 0 3.00

Tower International presently has a consensus target price of $33.25, suggesting a potential upside of 46.15%. China Automotive Systems has a consensus target price of $7.50, suggesting a potential upside of 55.28%. Given China Automotive Systems’ stronger consensus rating and higher possible upside, analysts clearly believe China Automotive Systems is more favorable than Tower International.

Earnings and Valuation

This table compares Tower International and China Automotive Systems’ gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Tower International $1.92 billion 0.24 $182.70 million $2.27 10.02
China Automotive Systems $464.50 million 0.33 $37.50 million $0.71 6.80

Tower International has higher revenue and earnings than China Automotive Systems. China Automotive Systems is trading at a lower price-to-earnings ratio than Tower International, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Tower International and China Automotive Systems’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Tower International 2.47% 33.60% 6.00%
China Automotive Systems 4.86% 7.27% 3.57%

Risk & Volatility

Tower International has a beta of 2.57, meaning that its stock price is 157% more volatile than the S&P 500. Comparatively, China Automotive Systems has a beta of 2.22, meaning that its stock price is 122% more volatile than the S&P 500.

Insider & Institutional Ownership

89.7% of Tower International shares are owned by institutional investors. Comparatively, 4.9% of China Automotive Systems shares are owned by institutional investors. 6.2% of Tower International shares are owned by company insiders. Comparatively, 62.2% of China Automotive Systems shares are owned by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company is poised for long-term growth.

Dividends

Tower International pays an annual dividend of $0.44 per share and has a dividend yield of 1.9%. China Automotive Systems does not pay a dividend. Tower International pays out 19.4% of its earnings in the form of a dividend.

Summary

Tower International beats China Automotive Systems on 9 of the 16 factors compared between the two stocks.

About Tower International

Tower International, Inc. is a global manufacturer of engineered automotive structural metal components and assemblies primarily serving original equipment manufacturers (OEMs). The Company’s product portfolio includes body-structure stampings, frame and other chassis structures, and welded assemblies for small and large cars, crossovers, pickups and sport utility vehicles (SUVs). The Company offers body structures and assemblies, including structural metal components, such as body pillars, roof rails and side sills. The Company also offers Class A surfaces and assemblies, which are components of the exterior skin of the vehicle, such as body sides, hoods, doors, fenders and pickup truck boxes. The Company’s lower vehicle frames and structures include chassis structures. Its products include pickup truck and SUV full frames, automotive engine and rear suspension cradles, floor pan components and cross members that form the basic lower body structure of the vehicle.

About China Automotive Systems

China Automotive Systems, Inc., (China Automotive) is a holding company. The Company, through its subsidiary, Great Genesis Holdings Limited (Genesis), owns interests in over eight Sino-joint ventures and over five subsidiaries in the People’s Republic of China (PRC), which manufacture power steering systems and/or related products for various segments of the automobile industry. Genesis also owns interests in a Brazil-based trading company, which engages mainly in the import and sales of automotive parts in Brazil. Henglong USA Corporation (HLUSA), which is a subsidiary of the Company, engages in marketing of automotive parts in North America, and provides after sales service and research and development support. The Company’s geographical segments include the United States, China and other foreign countries. One of its subsidiaries, Shenyang Jinbei Henglong Automotive Steering System Co., Ltd., focuses on power steering parts for light duty vehicles.

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