Applied Industrial Technologies (NYSE: AIT) and Fastenal (NASDAQ:FAST) are both mid-cap industrial products companies, but which is the superior business? We will contrast the two businesses based on the strength of their risk, valuation, dividends, profitabiliy, institutional ownership, earnings and analyst recommendations.

Valuation & Earnings

This table compares Applied Industrial Technologies and Fastenal’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Applied Industrial Technologies $2.55 billion 0.86 $208.18 million $2.72 20.61
Fastenal $4.13 billion 3.00 $952.46 million $1.82 23.66

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

Insider & Institutional Ownership

87.5% of Applied Industrial Technologies shares are held by institutional investors. Comparatively, 82.5% of Fastenal shares are held by institutional investors. 4.4% of Applied Industrial Technologies shares are held by company insiders. Comparatively, 0.6% of Fastenal shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Analyst Ratings

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

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Applied Industrial Technologies 0 2 0 0 2.00
Fastenal 0 5 9 1 2.73

Applied Industrial Technologies currently has a consensus price target of $63.00, suggesting a potential upside of 12.40%. Fastenal has a consensus price target of $50.80, suggesting a potential upside of 17.95%. Given Fastenal’s stronger consensus rating and higher possible upside, analysts clearly believe Fastenal is more favorable than Applied Industrial Technologies.

Dividends

Applied Industrial Technologies pays an annual dividend of $1.16 per share and has a dividend yield of 2.1%. Fastenal pays an annual dividend of $1.28 per share and has a dividend yield of 3.0%. Applied Industrial Technologies pays out 42.6% of its earnings in the form of a dividend. Fastenal pays out 70.3% 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 7 consecutive years and Fastenal has raised its dividend for 6 consecutive years.

Profitability

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

Net Margins Return on Equity Return on Assets
Applied Industrial Technologies 4.20% 15.70% 8.15%
Fastenal 12.71% 26.86% 19.02%

Risk and Volatility

Applied Industrial Technologies has a beta of 0.95, meaning that its share price is 5% less volatile than the S&P 500. Comparatively, Fastenal has a beta of 0.98, meaning that its share price is 2% less volatile than the S&P 500.

Summary

Fastenal beats Applied Industrial Technologies on 13 of the 18 factors compared between the two stocks.

Applied Industrial Technologies Company Profile

Applied Industrial Technologies, Inc. is an industrial distributor in North America, Australia and New Zealand, serving maintenance, repair and operations (MRO), and original equipment manufacturing customers in various industries. In addition, the Company provides engineering, design, and systems integration for industrial and fluid power applications, as well as customized mechanical, fabricated rubber, and fluid power shop services. It operates in two segments: service center-based distribution and fluid power businesses. The service center-based distribution segment provides customers with a range of industrial products primarily through a network of service centers. The fluid power businesses segment consists of specialized regional companies that distribute fluid power components, design and assemble fluid power systems, and perform equipment repair. The fluid power businesses primarily sell products and services directly to customers rather than through the service centers.

Fastenal Company Profile

Fastenal Company is engaged in wholesale distribution of industrial and construction supplies. The Company is engaged in fastener distribution, and non-fastener maintenance and supply business. As of December 31, 2016, it distributed these supplies through a network of approximately 2,500 stores. Its customers are in the manufacturing and non-residential construction markets. The manufacturing market includes both original equipment manufacturers (OEM) and maintenance, repair, and operations (MRO). The non-residential construction market includes general, electrical, plumbing, sheet metal and road contractors. Other users of its products include farmers, truckers, railroads, oil exploration, production and refinement companies, mining companies, federal, state, and local governmental entities, schools and certain retail trades. Its original product offerings are fasteners and other industrial and construction supplies, many of which are sold under the Fastenal product name.

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