Federal Signal (NYSE: FSS) and CNH Industrial (NYSE:CNHI) are both multi-sector conglomerates companies, but which is the superior investment? We will contrast the two companies based on the strength of their analyst recommendations, profitability, risk, institutional ownership, dividends, valuation and earnings.

Volatility & Risk

Federal Signal has a beta of 1.33, indicating that its share price is 33% more volatile than the S&P 500. Comparatively, CNH Industrial has a beta of 0.86, indicating that its share price is 14% less volatile than the S&P 500.

Valuation and Earnings

This table compares Federal Signal and CNH Industrial’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Federal Signal $707.90 million 1.69 $43.80 million $0.73 27.32
CNH Industrial $24.87 billion 0.82 -$252.00 million $0.32 46.66

Federal Signal has higher earnings, but lower revenue than CNH Industrial. Federal Signal is trading at a lower price-to-earnings ratio than CNH Industrial, indicating that it is currently the more affordable of the two stocks.

Dividends

Federal Signal pays an annual dividend of $0.28 per share and has a dividend yield of 1.4%. CNH Industrial pays an annual dividend of $0.12 per share and has a dividend yield of 0.8%. Federal Signal pays out 38.4% of its earnings in the form of a dividend. CNH Industrial pays out 37.5% 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. Federal Signal has raised its dividend for 3 consecutive years. Federal Signal is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Institutional & Insider Ownership

84.1% of Federal Signal shares are held by institutional investors. Comparatively, 18.2% of CNH Industrial shares are held by institutional investors. 4.2% of Federal Signal shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Analyst Recommendations

This is a breakdown of current ratings and price targets for Federal Signal and CNH Industrial, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Federal Signal 0 0 2 0 3.00
CNH Industrial 0 2 6 0 2.75

Federal Signal presently has a consensus target price of $20.00, suggesting a potential upside of 0.30%. CNH Industrial has a consensus target price of $14.23, suggesting a potential downside of 4.67%. Given Federal Signal’s stronger consensus rating and higher probable upside, equities analysts clearly believe Federal Signal is more favorable than CNH Industrial.

Profitability

This table compares Federal Signal and CNH Industrial’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Federal Signal 5.30% 11.39% 5.64%
CNH Industrial 1.66% 14.63% 1.41%

Summary

Federal Signal beats CNH Industrial on 12 of the 17 factors compared between the two stocks.

Federal Signal Company Profile

Federal Signal Corporation designs, manufactures and supplies a suite of products and integrated solutions for municipal, governmental, industrial and commercial customers. The Company’s segments include the Environmental Solutions Group and the Safety and Security Systems Group. Its Environmental Solutions Group manufactures and supplies a range of street sweeper vehicles, sewer cleaner and vacuum loader trucks, hydro-excavation trucks and waterblasting equipment. The products are sold to both municipal and industrial customers under the Elgin, Vactor, Guzzler and Jetstream brand names. Safety and Security Systems is a manufacturer and supplier of systems and products that law enforcement, fire rescue, emergency medical services, campuses military facilities and industrial sites use to protect people and property. It offers systems for campus and community alerting, emergency vehicles, first responder interoperable communications and industrial communications, among others.

CNH Industrial Company Profile

CNH Industrial N.V. is a capital goods company. The Company is engaged in the design, production, marketing, sale and financing of agricultural and construction equipment, trucks, commercial vehicles, buses and specialty vehicles for firefighting, defense and other uses, as well as engines, transmissions and axles for vehicles and engines under marine and power generation applications. Its segments include Agricultural Equipment, which designs, manufactures and distributes farm machinery and implements; Construction Equipment, which designs, manufactures and distributes construction equipment; Commercial Vehicles, which designs, produces and sells a range of light, medium and heavy vehicles for the transportation and distribution of goods; Powertrain, which designs, manufactures and offers a range of propulsion and transmission systems, and axles for on- and off-road applications, and Financial Services, which offers a range of financial services to dealers and customers.

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