Kadant (NYSE: KAI) and MSC Industrial Direct (NYSE:MSM) are both industrial products companies, but which is the superior business? We will contrast the two companies based on the strength of their profitability, earnings, analyst recommendations, institutional ownership, dividends, valuation and risk.

Profitability

This table compares Kadant and MSC Industrial Direct’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Kadant 8.10% 12.68% 7.64%
MSC Industrial Direct 8.07% 20.05% 11.38%

Risk and Volatility

Kadant has a beta of 1.36, indicating that its stock price is 36% more volatile than the S&P 500. Comparatively, MSC Industrial Direct has a beta of 0.5, indicating that its stock price is 50% less volatile than the S&P 500.

Valuation and Earnings

This table compares Kadant and MSC Industrial Direct’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Kadant $418.86 million 2.24 $67.05 million $3.03 28.09
MSC Industrial Direct $2.88 billion 1.05 $443.59 million $3.99 16.86

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

Institutional & Insider Ownership

89.1% of Kadant shares are owned by institutional investors. Comparatively, 78.0% of MSC Industrial Direct shares are owned by institutional investors. 5.6% of Kadant shares are owned by company insiders. Comparatively, 31.3% of MSC Industrial Direct shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock will outperform the market over the long term.

Dividends

Kadant pays an annual dividend of $0.84 per share and has a dividend yield of 1.0%. MSC Industrial Direct pays an annual dividend of $1.80 per share and has a dividend yield of 2.7%. Kadant pays out 27.7% of its earnings in the form of a dividend. MSC Industrial Direct pays out 45.1% 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. Kadant has increased its dividend for 6 consecutive years and MSC Industrial Direct has increased its dividend for 3 consecutive years.

Analyst Recommendations

This is a summary of current ratings and target prices for Kadant and MSC Industrial Direct, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Kadant 0 0 3 0 3.00
MSC Industrial Direct 1 10 4 0 2.20

Kadant currently has a consensus target price of $76.67, suggesting a potential downside of 9.91%. MSC Industrial Direct has a consensus target price of $90.17, suggesting a potential upside of 34.02%. Given MSC Industrial Direct’s higher probable upside, analysts plainly believe MSC Industrial Direct is more favorable than Kadant.

Summary

MSC Industrial Direct beats Kadant on 9 of the 17 factors compared between the two stocks.

Kadant Company Profile

Kadant Inc. is a supplier of equipment and components used in process industries. In addition, the Company manufactures granules made from papermaking by-products. Its segments include Papermaking Systems and Wood Processing Systems. The Company has a customer base, which includes paper and oriented strand board (OSB) manufacturers. Papermaking Systems segment is engaged in developing, manufacturing, and marketing equipment for the global papermaking and paper recycling industries. Its Papermaking Systems segment consists of product lines, including Stock-Preparation; Doctoring, Cleaning, & Filtration, and Fluid-Handling. The Company develops, manufactures and markets stranders and related equipment used in the production of OSB.

MSC Industrial Direct Company Profile

MSC Industrial Direct Co., Inc. is a North American distributor of metalworking and maintenance, repair and operations (MRO) products and services. The Company’s range of MRO products include cutting tools, measuring instruments, tooling components, metalworking products, fasteners, flat stock, raw materials, abrasives, machinery hand and power tools, safety and janitorial supplies, plumbing supplies, materials handling products, power transmission components and electrical supplies. The Company serves a range of customers throughout the United States, Canada and the United Kingdom, from individual machine shops, to manufacturing companies, to government agencies, such as the General Services Administration and the Department of Defense. The Company also serves durable and non-durable goods manufacturing, education and healthcare markets, among others. As of September 3, 2016, the Company had operated a network of 12 customer fulfillment centers.

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