Federal Signal Corporation (NYSE: FSS) and Hyster-Yale Materials Handling (NYSE:HY) are both small-cap multi-sector conglomerates companies, but which is the better business? We will contrast the two businesses based on the strength of their earnings, profitability, risk, valuation, analyst recommendations, institutional ownership and dividends.

Volatility and Risk

Federal Signal Corporation has a beta of 1.36, meaning that its stock price is 36% more volatile than the S&P 500. Comparatively, Hyster-Yale Materials Handling has a beta of 1.05, meaning that its stock price is 5% more volatile than the S&P 500.

Dividends

Federal Signal Corporation pays an annual dividend of $0.28 per share and has a dividend yield of 1.5%. Hyster-Yale Materials Handling pays an annual dividend of $1.21 per share and has a dividend yield of 1.8%. Federal Signal Corporation pays out 42.4% of its earnings in the form of a dividend. Hyster-Yale Materials Handling pays out 33.8% 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 Hyster-Yale Materials Handling has raised its dividend for 4 consecutive years. Hyster-Yale Materials Handling is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Ratings

This is a summary of current recommendations for Federal Signal Corporation and Hyster-Yale Materials Handling, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Federal Signal Corporation 0 0 2 0 3.00
Hyster-Yale Materials Handling 0 1 2 0 2.67

Federal Signal Corporation presently has a consensus price target of $20.00, suggesting a potential upside of 8.28%. Hyster-Yale Materials Handling has a consensus price target of $74.00, suggesting a potential upside of 9.65%. Given Hyster-Yale Materials Handling’s higher possible upside, analysts clearly believe Hyster-Yale Materials Handling is more favorable than Federal Signal Corporation.

Profitability

This table compares Federal Signal Corporation and Hyster-Yale Materials Handling’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%
Hyster-Yale Materials Handling 2.17% 11.73% 4.33%

Valuation & Earnings

This table compares Federal Signal Corporation and Hyster-Yale Materials Handling’s top-line 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 1.45 $84.40 million $0.66 27.99
Hyster-Yale Materials Handling $2.72 billion 0.31 $101.90 million $3.58 18.85

Hyster-Yale Materials Handling has higher revenue and earnings than Federal Signal Corporation. Hyster-Yale Materials Handling 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

83.7% of Federal Signal Corporation shares are owned by institutional investors. Comparatively, 67.4% of Hyster-Yale Materials Handling shares are owned by institutional investors. 4.2% of Federal Signal Corporation shares are owned by insiders. Comparatively, 26.3% of Hyster-Yale Materials Handling shares are owned by 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.

Summary

Hyster-Yale Materials Handling beats Federal Signal Corporation on 9 of the 16 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.

Hyster-Yale Materials Handling Company Profile

Hyster-Yale Materials Handling, Inc. is a lift truck manufacturer. The Company designs, engineers, manufactures, sells and services a line of lift trucks, attachments and aftermarket parts marketed globally under the Hyster and Yale brand names, mainly to independent Hyster and Yale retail dealerships. The Company operates through five segments: the Americas, EMEA, JAPIC, Bolzoni and Nuvera. The Company offers a range of solutions, including attachments and hydrogen fuel cell power products, telematics, automation and fleet management services, as well as an array of other power options for its lift trucks. The Company’s segments for the lift truck business include three management units: the Americas, EMEA and JAPIC. Americas includes operations in the United States, Canada, Mexico, Brazil, Latin America and its corporate headquarters. EMEA includes operations in Europe, the Middle East and Africa. JAPIC includes operations in the Asia and Pacific regions including China.

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