Critical Analysis: Harman International Industries (HAR) and BorgWarner (BWA)
Harman International Industries (NYSE: HAR) and BorgWarner (NYSE:BWA) are both mid-cap cyclical consumer goods & services companies, but which is the superior stock? We will compare the two businesses based on the strength of their risk, valuation, institutional ownership, earnings, profitability, dividends and analyst recommendations.
Insider & Institutional Ownership
85.8% of Harman International Industries shares are owned by institutional investors. Comparatively, 95.7% of BorgWarner shares are owned by institutional investors. 0.9% of Harman International Industries shares are owned by insiders. Comparatively, 0.7% of BorgWarner shares are owned by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.
This is a breakdown of recent ratings and price targets for Harman International Industries and BorgWarner, as reported by MarketBeat.com.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
|Harman International Industries||0||1||0||0||2.00|
BorgWarner has a consensus target price of $48.50, indicating a potential downside of 9.14%. Given BorgWarner’s stronger consensus rating and higher probable upside, analysts clearly believe BorgWarner is more favorable than Harman International Industries.
Earnings & Valuation
This table compares Harman International Industries and BorgWarner’s revenue, earnings per share and valuation.
|Gross Revenue||Price/Sales Ratio||Net Income||Earnings Per Share||Price/Earnings Ratio|
|Harman International Industries||N/A||N/A||N/A||$5.06||22.04|
|BorgWarner||$9.07 billion||1.24||$118.50 million||$1.38||38.68|
BorgWarner has higher revenue and earnings than Harman International Industries. Harman International Industries is trading at a lower price-to-earnings ratio than BorgWarner, indicating that it is currently the more affordable of the two stocks.
This table compares Harman International Industries and BorgWarner’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
|Harman International Industries||5.12%||15.69%||6.40%|
Harman International Industries pays an annual dividend of $1.40 per share and has a dividend yield of 1.3%. BorgWarner pays an annual dividend of $0.68 per share and has a dividend yield of 1.3%. Harman International Industries pays out 27.7% of its earnings in the form of a dividend. BorgWarner pays out 49.3% 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. Harman International Industries has increased its dividend for 2 consecutive years and BorgWarner has increased its dividend for 6 consecutive years. BorgWarner is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.
Risk and Volatility
Harman International Industries has a beta of 1.55, meaning that its stock price is 55% more volatile than the S&P 500. Comparatively, BorgWarner has a beta of 1.76, meaning that its stock price is 76% more volatile than the S&P 500.
BorgWarner beats Harman International Industries on 10 of the 14 factors compared between the two stocks.
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.
BorgWarner Inc. is engaged in providing technology solutions for combustion, hybrid and electric vehicles. The Company’s segments include Engine and Drivetrain. The Engine segment’s products include turbochargers, timing devices and chains, emissions systems and thermal systems. The Engine segment develops and manufactures products for gasoline and diesel engines, and alternative powertrains. The Drivetrain segment’s products include transmission components and systems, all-wheel drive (AWD) torque transfer systems and rotating electrical devices. The Company’s products are manufactured and sold across the world, primarily to original equipment manufacturers (OEMs) of light vehicles (passenger cars, sport-utility vehicles (SUVs), vans and light trucks). The Company’s products are also sold to other OEMs of commercial vehicles (medium-duty trucks, heavy-duty trucks and buses) and off-highway vehicles (agricultural and construction machinery and marine applications.
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