Cummins (NYSE: CMI) and Simpson Manufacturing (NYSE:SSD) are both mid-cap auto/tires/trucks companies, but which is the superior stock? We will contrast the two businesses based on the strength of their institutional ownership, risk, valuation, dividends, analyst recommendations, profitability and earnings.

Analyst Ratings

This is a summary of recent ratings and price targets for Cummins and Simpson Manufacturing, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Cummins 2 10 4 0 2.13
Simpson Manufacturing 0 1 0 0 2.00

Cummins presently has a consensus target price of $166.07, suggesting a potential downside of 5.27%. Simpson Manufacturing has a consensus target price of $46.00, suggesting a potential downside of 7.24%. Given Cummins’ stronger consensus rating and higher possible upside, research analysts plainly believe Cummins is more favorable than Simpson Manufacturing.

Earnings & Valuation

This table compares Cummins and Simpson Manufacturing’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Cummins $18.36 billion 1.59 $2.35 billion $8.86 19.79
Simpson Manufacturing $914.03 million 2.56 $171.24 million $2.05 24.19

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

Institutional and Insider Ownership

80.3% of Cummins shares are held by institutional investors. Comparatively, 83.6% of Simpson Manufacturing shares are held by institutional investors. 0.6% of Cummins shares are held by company insiders. Comparatively, 0.4% of Simpson Manufacturing shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Dividends

Cummins pays an annual dividend of $4.32 per share and has a dividend yield of 2.5%. Simpson Manufacturing pays an annual dividend of $0.84 per share and has a dividend yield of 1.7%. Cummins pays out 48.8% of its earnings in the form of a dividend. Simpson Manufacturing pays out 41.0% 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. Cummins has increased its dividend for 7 consecutive years and Simpson Manufacturing has increased its dividend for 3 consecutive years. Cummins is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Risk and Volatility

Cummins has a beta of 1.13, suggesting that its share price is 13% more volatile than the S&P 500. Comparatively, Simpson Manufacturing has a beta of 1.4, suggesting that its share price is 40% more volatile than the S&P 500.

Profitability

This table compares Cummins and Simpson Manufacturing’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Cummins 8.10% 20.67% 9.91%
Simpson Manufacturing 10.78% 10.26% 8.96%

Summary

Cummins beats Simpson Manufacturing on 11 of the 17 factors compared between the two stocks.

About Cummins

Cummins Inc. designs, manufactures, distributes and services diesel and natural gas engines and engine-related component products. The Company’s segments include Engine, Distribution, Components and Power Systems. The Engine segment manufactures and markets a range of diesel and natural gas powered engines under the Cummins brand name, as well as certain customer brand names, for the heavy and medium-duty truck, bus, recreational vehicle (RV), light-duty automotive and agricultural markets. The Distribution segment consists of the product lines, which service and/or distribute a range of products and services, including parts, engines, power generation and service. The Components segment supplies products, including aftertreatment systems, turbochargers, filtration products and fuel systems for commercial diesel applications. The Power Systems segment consists of businesses, including Power generation, Industrial and Generator technologies.

About Simpson Manufacturing

Simpson Manufacturing Co., Inc., through its subsidiary, Simpson Strong-Tie Company Inc. (SST), designs, engineers and manufactures wood construction products, including connectors, truss plates, fastening systems, fasteners and pre-fabricated lateral systems used in light-frame construction. The Company’s segments are North America, Europe, Asia/Pacific, and Administrative & All Other. The North America segment includes operations primarily in the United States and Canada. The Europe segment includes operations primarily in France, the United Kingdom, Germany, Denmark, Switzerland, Portugal, Poland, the Netherlands and Belgium. The Asia/Pacific segment includes operations primarily in Australia, New Zealand, South Africa, China, Taiwan and Vietnam. The Company manufactures concrete construction products used for concrete, masonry, steel construction and for concrete repair, protection and strengthening, including adhesives, chemicals and mechanical anchors.

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