Tennant (NYSE: TNC) and Energy Recovery (NASDAQ:ERII) are both small-cap industrial products companies, but which is the better stock? We will compare the two businesses based on the strength of their analyst recommendations, risk, earnings, institutional ownership, dividends, valuation and profitabiliy.

Risk & Volatility

Tennant has a beta of 1.07, indicating that its share price is 7% more volatile than the S&P 500. Comparatively, Energy Recovery has a beta of 5.51, indicating that its share price is 451% more volatile than the S&P 500.

Profitability

This table compares Tennant and Energy Recovery’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Tennant 2.32% 15.39% 7.19%
Energy Recovery 3.07% 2.43% 1.07%

Earnings & Valuation

This table compares Tennant and Energy Recovery’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Tennant $873.73 million 1.34 $69.63 million $1.12 59.15
Energy Recovery $55.87 million 6.41 $3.95 million $0.03 222.74

Tennant has higher revenue and earnings than Energy Recovery. Tennant is trading at a lower price-to-earnings ratio than Energy Recovery, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a breakdown of recent recommendations and price targets for Tennant and Energy Recovery, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Tennant 0 2 0 0 2.00
Energy Recovery 0 0 5 0 3.00

Tennant currently has a consensus target price of $65.00, suggesting a potential downside of 1.89%. Energy Recovery has a consensus target price of $19.00, suggesting a potential upside of 184.43%. Given Energy Recovery’s stronger consensus rating and higher probable upside, analysts plainly believe Energy Recovery is more favorable than Tennant.

Insider and Institutional Ownership

88.9% of Tennant shares are held by institutional investors. Comparatively, 31.9% of Energy Recovery shares are held by institutional investors. 5.7% of Tennant shares are held by insiders. Comparatively, 23.6% of Energy Recovery shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company will outperform the market over the long term.

Dividends

Tennant pays an annual dividend of $0.84 per share and has a dividend yield of 1.3%. Energy Recovery does not pay a dividend. Tennant pays out 75.0% of its earnings in the form of a dividend. Energy Recovery has increased its dividend for 45 consecutive years.

Summary

Energy Recovery beats Tennant on 10 of the 17 factors compared between the two stocks.

About Tennant

Tennant Company is engaged in designing, manufacturing and marketing of cleaning solutions. The Company’s segments are Americas; Europe, Middle East, Africa, and Asia Pacific. The Company offers a range of products, including floor maintenance and outdoor cleaning equipment, detergent-free and other sustainable cleaning technologies, aftermarket parts and consumables, equipment maintenance and repair service, specialty surface coatings and asset management solutions. Its products are used in various types of environments, including retail establishments, distribution centers, factories and warehouses, public venues such as arenas and stadiums, office buildings, schools and universities, hospitals and clinics, parking lots and streets. The Company markets and sells its products under various brands: Tennant, Nobles, Green Machines, Alfa Uma Empresa Tennant, IRIS, Orbio IPC, IPC Foma, IPC Eagle, IPC Gansow, ICA, Vaclensa, Portotecnica, Sirio and Soteco, Ready System, Euromop, and Pulex.

About Energy Recovery

Energy Recovery, Inc. is an energy solutions provider to industrial fluid flow markets. The Company’s solutions convert wasted pressure energy into a reusable asset and preserve or eliminate pumping technology in hostile processing environments. Its segments include Water, Oil & Gas, and Corporate. The Water Segment focuses on products sold for use in reverse osmosis water desalination. The Oil & Gas Segment consists of products sold for use in hydraulic fracturing, gas processing, and chemical processing. The Company offers energy recovery devices (ERDs) in the water desalination market with its pressure exchanger (PX) and turbocharger technologies. The Company offers VorTeq hydraulic fracturing system, IsoBoost, and IsoGen product lines to the oil and gas market. The Company’s customers include engineering, procurement and construction companies, original equipment manufacturers, international oil companies, national oil companies, and exploration and production companies.

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