W.W. Grainger (NYSE: GWW) and Barnes Group (NYSE:B) are both mid-cap industrial machinery & equipment – nec companies, but which is the superior investment? We will compare the two companies based on the strength of their risk, analyst recommendations, earnings, valuation, profitability, dividends and institutional ownership.

Volatility and Risk

W.W. Grainger has a beta of 0.77, indicating that its share price is 23% less volatile than the S&P 500. Comparatively, Barnes Group has a beta of 1.37, indicating that its share price is 37% more volatile than the S&P 500.

Institutional and Insider Ownership

86.0% of W.W. Grainger shares are held by institutional investors. Comparatively, 86.8% of Barnes Group shares are held by institutional investors. 9.6% of W.W. Grainger shares are held by company insiders. Comparatively, 8.5% of Barnes Group shares are held by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Earnings & Valuation

This table compares W.W. Grainger and Barnes Group’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio NetIncome Earnings Per Share Price/Earnings Ratio
W.W. Grainger $10.14 billion 1.10 $605.92 million $8.43 23.22
Barnes Group $1.23 billion 2.69 $135.60 million $2.84 21.74

W.W. Grainger has higher revenue and earnings than Barnes Group. Barnes Group is trading at a lower price-to-earnings ratio than W.W. Grainger, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a breakdown of recent recommendations for W.W. Grainger and Barnes Group, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
W.W. Grainger 4 11 1 0 1.81
Barnes Group 0 3 3 0 2.50

W.W. Grainger currently has a consensus price target of $190.92, suggesting a potential downside of 2.46%. Barnes Group has a consensus price target of $65.60, suggesting a potential upside of 6.27%. Given Barnes Group’s stronger consensus rating and higher possible upside, analysts clearly believe Barnes Group is more favorable than W.W. Grainger.

Profitability

This table compares W.W. Grainger and Barnes Group’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
W.W. Grainger 4.83% 34.25% 11.20%
Barnes Group 11.20% 12.44% 6.96%

Dividends

W.W. Grainger pays an annual dividend of $5.12 per share and has a dividend yield of 2.6%. Barnes Group pays an annual dividend of $0.56 per share and has a dividend yield of 0.9%. W.W. Grainger pays out 60.7% of its earnings in the form of a dividend. Barnes Group pays out 19.7% 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. W.W. Grainger has increased its dividend for 45 consecutive years and Barnes Group has increased its dividend for 4 consecutive years. W.W. Grainger is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

Barnes Group beats W.W. Grainger on 9 of the 17 factors compared between the two stocks.

About W.W. Grainger

W.W. Grainger, Inc. (Grainger) is a distributor of maintenance, repair and operating (MRO) supplies and other related products and services. The Company offers its products and services to businesses and institutions in the United States and Canada, with presence also in Europe, Asia and Latin America. The Company operates through two segments, which include the United States and Canada. The Company’s business support functions provide coordination and guidance in the areas of accounting and finance, business development, communications and investor relations, compensation and benefits, information systems, health and safety, global supply chain functions, human resources, risk management, internal audit, legal, real estate, security, tax and treasury. The Company’s other businesses also include Zoro Tools, Inc. (Zoro), the single channel online business in the United States, MonotaRO Co. (MonotaRO) in Japan, and operations in Europe, Asia and Latin America.

About Barnes Group

Barnes Group Inc. is an industrial and aerospace manufacturer and service provider, serving a range of end markets and customers. The Company’s engineered products, industrial technologies, and solutions are used in applications that provide transportation, manufacturing, healthcare products and technology to the world. Its segments include Industrial and Aerospace. The Industrial segment is engaged in the manufacturing of precision parts, products and systems for applications serving a customer base in end-markets, such as transportation, industrial equipment, consumer products, packaging, electronics, medical devices and energy. The Industrial segment includes the Molding Solutions, Nitrogen Gas Products and Engineered Components business units. The Aerospace segment includes the original equipment manufacturer (OEM) business and the aftermarket business, which includes maintenance repair and overhaul services and the manufacture and delivery of aerospace aftermarket spare parts.

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