Meritor (NYSE: MTOR) and Harman International Industries (NYSE:HAR) are both auto/tires/trucks companies, but which is the better business? We will compare the two companies based on the strength of their earnings, institutional ownership, dividends, profitability, analyst recommendations, risk and valuation.

Analyst Recommendations

This is a breakdown of current recommendations and price targets for Meritor and Harman International Industries, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Meritor 0 3 4 0 2.57
Harman International Industries 0 6 0 0 2.00

Meritor presently has a consensus price target of $23.07, indicating a potential upside of 2.18%. Harman International Industries has a consensus price target of $107.25, indicating a potential downside of 3.81%. Given Meritor’s stronger consensus rating and higher possible upside, research analysts plainly believe Meritor is more favorable than Harman International Industries.

Institutional and Insider Ownership

93.2% of Meritor shares are owned by institutional investors. Comparatively, 85.8% of Harman International Industries shares are owned by institutional investors. 2.9% of Meritor shares are owned by insiders. Comparatively, 0.9% of Harman International Industries shares are owned by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Profitability

This table compares Meritor and Harman International Industries’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Meritor 17.03% -106.67% 5.68%
Harman International Industries 5.12% 15.69% 6.40%

Volatility and Risk

Meritor has a beta of 2.21, meaning that its stock price is 121% more volatile than the S&P 500. Comparatively, Harman International Industries has a beta of 1.64, meaning that its stock price is 64% more volatile than the S&P 500.

Earnings and Valuation

This table compares Meritor and Harman International Industries’ revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Meritor $3.15 billion 0.63 $255.00 million $6.02 3.75
Harman International Industries N/A N/A N/A $5.07 21.99

Meritor has higher revenue and earnings than Harman International Industries. Meritor is trading at a lower price-to-earnings ratio than Harman International Industries, indicating that it is currently the more affordable of the two stocks.

Dividends

Harman International Industries pays an annual dividend of $1.40 per share and has a dividend yield of 1.3%. Meritor does not pay a dividend. Harman International Industries pays out 27.6% of its earnings in the form of a dividend. Meritor has raised its dividend for 6 consecutive years.

Summary

Meritor beats Harman International Industries on 11 of the 14 factors compared between the two stocks.

About Meritor

Meritor, Inc. is a supplier of a range of integrated systems, modules and components to original equipment manufacturers (OEMs) and the aftermarket for the commercial vehicle, transportation and industrial sectors. The Company’s segments include Commercial Truck & Industrial and Aftermarket & Trailer. The Commercial Truck & Industrial segment supplies drivetrain systems and components, including axles, drivelines and braking and suspension systems, for medium- and heavy-duty trucks, off-highway, military, construction, bus and coach, fire and emergency and other applications in North America, South America, Europe and Asia Pacific. The Commercial Truck & Industrial segment also includes the Company’s aftermarket businesses in Asia Pacific and South America. The Aftermarket & Trailer segment supplies axles, brakes, drivelines, suspension parts and other replacement and remanufactured parts to commercial vehicle aftermarket customers in North America and Europe.

About Harman International Industries

Harman International Industries, Incorporated is engaged in the designing and engineering of connected products and solutions for automakers, consumers and enterprises, including connected car systems, audio and visual products, enterprise automation solutions and connected services. The Company’s segments include Connected Car, Lifestyle Audio, Professional Solutions, Connected Services and Other. The Connected Car segment designs, manufactures and markets connected car systems for vehicle applications. The Lifestyle Audio segment designs, manufactures and markets car audio systems. The Professional Solutions segment designs, manufactures and markets a range of audio, lighting, video and control, and automation solutions for entertainment and enterprise applications The Connected Services segment includes the operations of Symphony Teleca Corporation, Red Bend Ltd. and its automotive services businesses. Its brands include AKG, AMX, Crown, Infinity, JBL, Revel, Soundcraft and Studer.

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