Head-To-Head Review: MTS Systems (MTSC) versus Emerson Electric (EMR)

MTS Systems (NASDAQ: MTSC) and Emerson Electric (NYSE:EMR) are both computer and technology companies, but which is the better stock? We will contrast the two companies based on the strength of their institutional ownership, risk, dividends, valuation, analyst recommendations, profitability and earnings.

Institutional & Insider Ownership

97.8% of MTS Systems shares are held by institutional investors. Comparatively, 69.2% of Emerson Electric shares are held by institutional investors. 1.8% of MTS Systems shares are held by insiders. Comparatively, 0.8% of Emerson Electric shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock is poised for long-term growth.

Dividends

MTS Systems pays an annual dividend of $1.20 per share and has a dividend yield of 2.2%. Emerson Electric pays an annual dividend of $1.94 per share and has a dividend yield of 2.6%. MTS Systems pays out 91.6% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Emerson Electric pays out 75.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Emerson Electric has raised its dividend for 61 consecutive years. Emerson Electric is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Valuation and Earnings

This table compares MTS Systems and Emerson Electric’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
MTS Systems $787.96 million 1.23 $25.08 million $1.31 41.72
Emerson Electric $15.26 billion 3.07 $1.52 billion $2.56 28.62

Emerson Electric has higher revenue and earnings than MTS Systems. Emerson Electric is trading at a lower price-to-earnings ratio than MTS Systems, indicating that it is currently the more affordable of the two stocks.

Risk and Volatility

MTS Systems has a beta of 1.27, meaning that its stock price is 27% more volatile than the S&P 500. Comparatively, Emerson Electric has a beta of 1.24, meaning that its stock price is 24% more volatile than the S&P 500.

Analyst Recommendations

This is a summary of recent recommendations and price targets for MTS Systems and Emerson Electric, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
MTS Systems 0 1 2 0 2.67
Emerson Electric 2 8 5 0 2.20

MTS Systems currently has a consensus target price of $65.50, suggesting a potential upside of 19.85%. Emerson Electric has a consensus target price of $67.58, suggesting a potential downside of 7.76%. Given MTS Systems’ stronger consensus rating and higher possible upside, equities analysts clearly believe MTS Systems is more favorable than Emerson Electric.

Profitability

This table compares MTS Systems and Emerson Electric’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
MTS Systems 3.18% 10.32% 3.61%
Emerson Electric 9.94% 20.47% 9.05%

Summary

Emerson Electric beats MTS Systems on 11 of the 17 factors compared between the two stocks.

MTS Systems Company Profile

MTS Systems Corporation is a supplier of test systems and position sensors. The Company operates through two segments: Test and Sensors. The Test segment provides testing solutions, including hardware, software and services to ground vehicles, materials and structures markets. The Sensors segment provides position sensors for a range of industrial and mobile hydraulic applications. The Sensors segment products are used by industrial machinery and mobile equipment manufacturers to automate the operation of their products for safety and end-user productivity. The Sensors segment manufactures products utilizing magnetostriction technology. Its technology, Temposonics, offers non-contact position sensing. Its Temposonics sensors provide position feedback for motion control systems. It also provides various service offerings, including calibration, maintenance, training and consulting. The Company has its manufacturing facilities in North America, Europe and Asia.

Emerson Electric Company Profile

Emerson Electric Co. is a diversified global manufacturing company, which provides solutions to customers by bringing technology and engineering together in the industrial, commercial and consumer markets around the world. The Company operates through four segments based on the nature of the products and services rendered: Process Management, Industrial Automation, Climate Technologies and Commercial & Residential Solutions. The Company’s principal production operations are electronics assembly, metal stamping, forming, casting, machining, welding, plating, heat treating, painting and assembly. In addition, the Company uses specialized production operations, including automatic and semiautomatic testing, automated material handling and storage, ferrous and nonferrous machining, and special furnaces for heat treating and foundry applications. The Company provides measurement, control and diagnostic technologies for automated industrial processes.

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