Federal Signal Corporation (NYSE: FSS) and Terex Corporation (NYSE:TEX) are both multi-sector conglomerates companies, but which is the better investment? We will contrast the two companies based on the strength of their earnings, risk, institutional ownership, dividends, profitability, valuation and analyst recommendations.

Profitability

This table compares Federal Signal Corporation and Terex Corporation’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Federal Signal Corporation 5.20% 10.59% 5.78%
Terex Corporation -1.76% 4.98% 1.79%

Dividends

Federal Signal Corporation pays an annual dividend of $0.28 per share and has a dividend yield of 1.5%. Terex Corporation pays an annual dividend of $0.32 per share and has a dividend yield of 0.8%. Federal Signal Corporation pays out 42.4% of its earnings in the form of a dividend. Terex Corporation pays out -50.8% 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. Federal Signal Corporation has raised its dividend for 2 consecutive years and Terex Corporation has raised its dividend for 3 consecutive years.

Valuation and Earnings

This table compares Federal Signal Corporation and Terex Corporation’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Federal Signal Corporation $765.00 million 1.44 $84.40 million $0.66 27.85
Terex Corporation $4.22 billion 0.83 $152.10 million ($0.63) -62.16

Terex Corporation has higher revenue and earnings than Federal Signal Corporation. Terex Corporation is trading at a lower price-to-earnings ratio than Federal Signal Corporation, indicating that it is currently the more affordable of the two stocks.

Institutional and Insider Ownership

81.4% of Federal Signal Corporation shares are held by institutional investors. Comparatively, 99.3% of Terex Corporation shares are held by institutional investors. 4.2% of Federal Signal Corporation shares are held by insiders. Comparatively, 2.5% of Terex Corporation shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock is poised for long-term growth.

Analyst Recommendations

This is a breakdown of recent ratings and recommmendations for Federal Signal Corporation and Terex Corporation, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Federal Signal Corporation 0 0 2 0 3.00
Terex Corporation 3 6 6 0 2.20

Federal Signal Corporation currently has a consensus price target of $20.00, indicating a potential upside of 8.81%. Terex Corporation has a consensus price target of $36.15, indicating a potential downside of 7.68%. Given Federal Signal Corporation’s stronger consensus rating and higher probable upside, equities research analysts clearly believe Federal Signal Corporation is more favorable than Terex Corporation.

Risk and Volatility

Federal Signal Corporation has a beta of 1.37, indicating that its stock price is 37% more volatile than the S&P 500. Comparatively, Terex Corporation has a beta of 1.85, indicating that its stock price is 85% more volatile than the S&P 500.

Summary

Federal Signal Corporation beats Terex Corporation on 9 of the 17 factors compared between the two stocks.

Federal Signal Corporation Company Profile

Federal Signal Corporation designs, manufactures and supplies a suite of products and integrated solutions for municipal, governmental, industrial and commercial customers. The Company’s segments include the Environmental Solutions Group and the Safety and Security Systems Group. Its Environmental Solutions Group manufactures and supplies a range of street sweeper vehicles, sewer cleaner and vacuum loader trucks, hydro-excavation trucks and waterblasting equipment. The products are sold to both municipal and industrial customers under the Elgin, Vactor, Guzzler and Jetstream brand names. Safety and Security Systems is a manufacturer and supplier of systems and products that law enforcement, fire rescue, emergency medical services, campuses military facilities and industrial sites use to protect people and property. It offers systems for campus and community alerting, emergency vehicles, first responder interoperable communications and industrial communications, among others.

Terex Corporation Company Profile

Terex Corporation is a manufacturer of lifting and material processing products and services that deliver lifecycle solutions. The Company has three business segments: Aerial Work Platforms (AWP), Cranes and Materials Processing (MP). It delivers lifecycle solutions to a range of industries, including the construction, infrastructure, manufacturing, shipping, utility, quarrying and mining industries. The AWP segment designs, manufactures, services and markets aerial work platform equipment, telehandlers and light towers. The AWP segment’s products are used by its customers to construct and maintain industrial, commercial and residential buildings and facilities, and for other commercial operations, as well as in a range of infrastructure projects. The Cranes segment’s products are used by its customers for construction and manufacturing facilities, among others. The MP segment’s products are used by its customers in construction, infrastructure and recycling projects.

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