Analyzing Transcat (TRNS) & KEMET (KEM)

Transcat (NASDAQ: TRNS) and KEMET (NYSE:KEM) are both small-cap computer and technology companies, but which is the better stock? We will contrast the two businesses based on the strength of their profitability, institutional ownership, valuation, analyst recommendations, dividends, earnings and risk.

Institutional & Insider Ownership

57.1% of Transcat shares are held by institutional investors. Comparatively, 69.4% of KEMET shares are held by institutional investors. 8.8% of Transcat shares are held by insiders. Comparatively, 3.9% of KEMET shares are held by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.

Earnings and Valuation

This table compares Transcat and KEMET’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Transcat $143.90 million 0.78 $4.52 million $0.68 23.16
KEMET $757.79 million 1.31 $47.98 million $5.00 3.50

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

Analyst Ratings

This is a breakdown of recent ratings and price targets for Transcat and KEMET, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Transcat 0 0 3 0 3.00
KEMET 0 1 1 0 2.50

Transcat currently has a consensus price target of $20.00, indicating a potential upside of 26.98%. KEMET has a consensus price target of $18.38, indicating a potential upside of 5.24%. Given Transcat’s stronger consensus rating and higher probable upside, equities analysts clearly believe Transcat is more favorable than KEMET.

Risk and Volatility

Transcat has a beta of 0.4, suggesting that its stock price is 60% less volatile than the S&P 500. Comparatively, KEMET has a beta of 3.63, suggesting that its stock price is 263% more volatile than the S&P 500.

Profitability

This table compares Transcat and KEMET’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Transcat 3.24% 10.03% 4.94%
KEMET 28.33% 22.51% 7.54%

Summary

KEMET beats Transcat on 9 of the 14 factors compared between the two stocks.

About Transcat

Transcat, Inc. is a provider of calibration and laboratory instrument services and a distributor of professional grade test, measurement and control instrumentation. The Company conducts its business through two segments: service (Service) and distribution (Distribution). Through the Service segment, the Company offers calibration, repair, inspection, analytical qualifications, preventative maintenance and other related services, a majority of which are processed through its asset management system, CalTrak (CalTrak). Through its Distribution segment, the Company markets, sells and rents national brand instruments to customers around the globe. The Company is focused on providing its services and products to the life science industries, which include pharmaceutical, biotechnology, medical device manufacturing and other Food and Drug Administration (FDA)-regulated businesses.

About KEMET

KEMET Corporation (KEMET) is a manufacturer of passive electronic components. The Company operates in two segments: Solid Capacitors, and Film and Electrolytic. The Solid Capacitors segment primarily produces tantalum, aluminum, polymer and ceramic capacitors. Solid Capacitors also produces tantalum powder used in the production of tantalum capacitors. The Film and Electrolytic Business Group produces film, paper and wet aluminum electrolytic capacitors. It also designs and produces EMI Filters. The Company’s product offerings include surface mount, which are attached directly to the circuit board; leaded capacitors, which are attached to the circuit board using lead wires, and chassis-mount and other pin-through-hole board-mount capacitors, which utilize attachment methods, such as screw terminal and snap-in. The Company sells its products to a range of original equipment manufacturers (OEMs) and electronics manufacturing services (EMS) providers.

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