Precision Castparts (NYSE: PCP) and General Dynamics (NYSE:GD) are both large-cap industrials companies, but which is the better investment? We will compare the two businesses based on the strength of their dividends, earnings, valuation, institutional ownership, risk, profitability and analyst recommendations.

Profitability

This table compares Precision Castparts and General Dynamics’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Precision Castparts 15.17% 12.16% 6.86%
General Dynamics 9.94% 27.98% 9.15%

Insider and Institutional Ownership

86.8% of General Dynamics shares are held by institutional investors. 6.7% of General Dynamics shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Valuation & Earnings

This table compares Precision Castparts and General Dynamics’ revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Precision Castparts N/A N/A N/A $9.53 24.65
General Dynamics $31.35 billion 1.93 $2.96 billion $10.03 20.20

General Dynamics has higher revenue and earnings than Precision Castparts. General Dynamics is trading at a lower price-to-earnings ratio than Precision Castparts, indicating that it is currently the more affordable of the two stocks.

Dividends

Precision Castparts pays an annual dividend of $0.12 per share and has a dividend yield of 0.1%. General Dynamics pays an annual dividend of $3.36 per share and has a dividend yield of 1.7%. Precision Castparts pays out 1.3% of its earnings in the form of a dividend. General Dynamics pays out 33.5% 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. General Dynamics has increased its dividend for 19 consecutive years. General Dynamics is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Recommendations

This is a breakdown of current ratings and recommmendations for Precision Castparts and General Dynamics, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Precision Castparts 0 0 0 0 N/A
General Dynamics 2 3 7 0 2.42

General Dynamics has a consensus price target of $218.85, suggesting a potential upside of 8.00%. Given General Dynamics’ higher possible upside, analysts clearly believe General Dynamics is more favorable than Precision Castparts.

Summary

General Dynamics beats Precision Castparts on 10 of the 13 factors compared between the two stocks.

Precision Castparts Company Profile

Precision Castparts Corp. is a manufacturer of metal components and products. The Company has three business segments: Investment Cast Products, Forged Products and Airframe Products. The Company’s Investment Cast Products segment manufactures investment castings and provides related investment casting materials and alloys, for aircraft engines, industrial gas turbine (IGT) engines, airframes, armaments, medical prostheses, unmanned aerial vehicles and other industrial applications. The Company’s Forged Products segment manufactures forged components from titanium and nickel-based alloys, and nickel, titanium and cobalt-based alloys for aerospace and non-aerospace markets, which include products for oil and gas, chemical processing and pollution control applications. The Company’s Airframe Products segment manufactures fasteners, fastener systems, fluid fittings, aerostructures and precision components, primarily for aerospace applications.

General Dynamics Company Profile

General Dynamics Corporation is a global aerospace and defense company. The Company offers a portfolio of products and services in business aviation; combat vehicles, weapons systems and munitions; information technology (IT) services and C4ISR (command, control, communications, computers, intelligence, surveillance and reconnaissance) solutions, and shipbuilding and ship repair. It operates through four business groups: Aerospace, Combat Systems, Information Systems and Technology, and Marine Systems. Its Aerospace group offers aircraft design; cockpit and cabin systems, and product service and support. Its Combat Systems group offers combat vehicles, weapons systems and munitions. The Information Systems and Technology group provides technologies, products and services in support of various programs. The Marine Systems group is a designer and builder of nuclear-powered submarines, surface combatants and auxiliary and combat-logistics ships.

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