American Railcar Industries (NASDAQ: ARII) and Westinghouse Air Brake Technologies Corporation (NYSE:WAB) are both transportation companies, but which is the better business? We will contrast the two companies based on the strength of their risk, analyst recommendations, valuation, institutional ownership, earnings, profitabiliy and dividends.

Volatility and Risk

American Railcar Industries has a beta of 2.34, suggesting that its stock price is 134% more volatile than the S&P 500. Comparatively, Westinghouse Air Brake Technologies Corporation has a beta of 1.07, suggesting that its stock price is 7% more volatile than the S&P 500.

Institutional & Insider Ownership

96.7% of American Railcar Industries shares are held by institutional investors. 0.0% of American Railcar Industries shares are held by company insiders. Comparatively, 11.7% of Westinghouse Air Brake Technologies Corporation shares are held by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company will outperform the market over the long term.

Dividends

American Railcar Industries pays an annual dividend of $1.60 per share and has a dividend yield of 4.4%. Westinghouse Air Brake Technologies Corporation pays an annual dividend of $0.40 per share and has a dividend yield of 0.5%. American Railcar Industries pays out 51.1% of its earnings in the form of a dividend. Westinghouse Air Brake Technologies Corporation pays out 12.9% 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. Westinghouse Air Brake Technologies Corporation has raised its dividend for 6 consecutive years.

Profitability

This table compares American Railcar Industries and Westinghouse Air Brake Technologies Corporation’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
American Railcar Industries 10.46% 12.91% 4.89%
Westinghouse Air Brake Technologies Corporation 9.26% 15.37% 6.97%

Analyst Recommendations

This is a summary of current recommendations and price targets for American Railcar Industries and Westinghouse Air Brake Technologies Corporation, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
American Railcar Industries 0 2 1 0 2.33
Westinghouse Air Brake Technologies Corporation 0 4 4 0 2.50

American Railcar Industries presently has a consensus target price of $41.50, indicating a potential upside of 13.51%. Westinghouse Air Brake Technologies Corporation has a consensus target price of $96.83, indicating a potential upside of 10.68%. Given American Railcar Industries’ higher probable upside, analysts plainly believe American Railcar Industries is more favorable than Westinghouse Air Brake Technologies Corporation.

Valuation and Earnings

This table compares American Railcar Industries and Westinghouse Air Brake Technologies Corporation’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
American Railcar Industries $577.63 million 1.21 $164.64 million $3.13 11.68
Westinghouse Air Brake Technologies Corporation $3.08 billion 2.73 $559.63 million $3.10 28.22

Westinghouse Air Brake Technologies Corporation has higher revenue and earnings than American Railcar Industries. American Railcar Industries is trading at a lower price-to-earnings ratio than Westinghouse Air Brake Technologies Corporation, indicating that it is currently the more affordable of the two stocks.

Summary

Westinghouse Air Brake Technologies Corporation beats American Railcar Industries on 11 of the 17 factors compared between the two stocks.

American Railcar Industries Company Profile

American Railcar Industries, Inc. is a designer and manufacturer of hopper and tank railcars. The Company designs and manufactures railcars and a range of components for the North American railcar and industrial markets. It operates through three segments: manufacturing, railcar leasing and railcar services. The Company’s Manufacturing segment consists of railcar manufacturing and railcar and industrial component manufacturing. The Railcar leasing segment consists of railcars manufactured by it and leased to third parties under operating leases. The Railcar services segment consists of railcar repair, engineering and field services. As of December 31, 2016, the Company’s operations included eight manufacturing plants that fabricate and assemble raw materials, mainly steel, into railcars, railcar components and industrial components; eight railcar repair plants; and 11 mobile repair (mobile units) and mini repair shop (mini shop) locations.

Westinghouse Air Brake Technologies Corporation Company Profile

Westinghouse Air Brake Technologies Corporation (Wabtec), doing business as Wabtec Corporation, is a provider of technology-based equipment and services for the global freight and transit rail industries. The Company’s segments include the Freight Segment and the Transit Segment. The Freight Segment primarily manufactures and services components for new and existing freight cars and locomotives, builds new switcher locomotives, rebuilds freight locomotives, supplies railway electronics, positive train control equipment, signal design and engineering services, and provides related heat exchange and cooling systems. The Transit Segment primarily manufactures and services components for new and existing passenger transit vehicles, typically regional trains, high speed trains, subway cars, light-rail vehicles and buses, builds new commuter locomotives, refurbishes subway cars, provides heating, ventilation, and air conditioning equipment, and doors for buses and subways.

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