Financial Analysis: HC2 (NYSE:HCHC) vs. Illinois Tool Works (ITW)

HC2 (NYSE: HCHC) and Illinois Tool Works (NYSE:ITW) are both multi-sector conglomerates companies, but which is the superior investment? We will contrast the two companies based on the strength of their risk, earnings, valuation, analyst recommendations, institutional ownership, profitability and dividends.

Valuation & Earnings

This table compares HC2 and Illinois Tool Works’ top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
HC2 $1.56 billion 0.18 -$94.54 million ($2.58) -2.50
Illinois Tool Works $13.60 billion 4.30 $2.04 billion $6.53 26.11

Illinois Tool Works has higher revenue and earnings than HC2. HC2 is trading at a lower price-to-earnings ratio than Illinois Tool Works, indicating that it is currently the more affordable of the two stocks.

Volatility & Risk

HC2 has a beta of 0.66, indicating that its share price is 34% less volatile than the S&P 500. Comparatively, Illinois Tool Works has a beta of 1.18, indicating that its share price is 18% more volatile than the S&P 500.

Dividends

Illinois Tool Works pays an annual dividend of $3.12 per share and has a dividend yield of 1.8%. HC2 does not pay a dividend. Illinois Tool Works pays out 47.8% of its earnings in the form of a dividend. Illinois Tool Works has increased its dividend for 54 consecutive years.

Analyst Ratings

This is a summary of current recommendations and price targets for HC2 and Illinois Tool Works, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
HC2 0 0 1 0 3.00
Illinois Tool Works 0 9 7 0 2.44

HC2 presently has a consensus target price of $11.50, indicating a potential upside of 78.29%. Illinois Tool Works has a consensus target price of $164.80, indicating a potential downside of 3.35%. Given HC2’s stronger consensus rating and higher probable upside, equities analysts clearly believe HC2 is more favorable than Illinois Tool Works.

Profitability

This table compares HC2 and Illinois Tool Works’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
HC2 -6.13% -67.69% -1.67%
Illinois Tool Works 16.12% 47.21% 13.91%

Institutional & Insider Ownership

59.9% of HC2 shares are held by institutional investors. Comparatively, 74.7% of Illinois Tool Works shares are held by institutional investors. 16.0% of HC2 shares are held by company insiders. Comparatively, 0.9% of Illinois Tool Works shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Summary

Illinois Tool Works beats HC2 on 12 of the 16 factors compared between the two stocks.

HC2 Company Profile

HC2 Holdings, Inc. engages in construction, marine services, insurance, telecommunications, energy, life sciences, and other businesses in the United States, the United Kingdom, and internationally. The company fabricates and erects structural steel for commercial and industrial construction projects, such as buildings and office complexes, hotels and casinos, convention centers, sports arenas and stadiums, shopping malls, hospitals, dams, bridges, mines, and power plants. It also fabricates trusses and girders; and fabricates and erects water pipes, water storage tanks, pollution control scrubbers, tunnel liners, pressure vessels, strainers, filters, separators, and various customized products. In addition, the company provides subsea cable installation and maintenance services for the telecommunications sector; installation, maintenance, and repair services for fiber optic communication and power infrastructure to offshore platforms; and installation services for power cables for use in offshore wind farms and in the offshore wind market. Further, it distributes natural gas motor fuels; designs, builds, owns, acquires, operates, and maintains compressed natural gas fueling stations for transportation vehicles; and offers voice communication services for national telecommunications, mobile, prepaid, and voice over Internet protocol service operators, as well as wholesale carriers and Internet service providers. Additionally, the company provides long-term care, life, and annuity insurance products to individuals. Furthermore, it focuses on developing products to treat early osteoarthritis of the knee; develops skin lightening technology; owns licenses to create and distribute NASCAR video games; and offers analytics on broadcast TV, digital, and social media online platforms. The company was formerly known as PTGi Holding Inc. and changed its name to HC2 Holdings, Inc. in April 2014. HC2 Holdings, Inc. was founded in 1994 and is headquartered in New York, New York.

Illinois Tool Works Company Profile

Illinois Tool Works Inc. is a manufacturer of industrial products and equipment. The Company operates through seven segments. The Automotive OEM segment produces components and fasteners for automotive-related applications. The Food Equipment segment offers commercial food equipment. The Test & Measurement and Electronics segment produces test and measurement, and electronic manufacturing and maintenance, repair and operations (MRO) solutions. The Welding segment produces welding equipment, consumables and accessories for industrial and commercial applications. The Polymers & Fluids segment produces adhesives, sealants, lubrication and cutting fluids, and fluids and polymers for auto aftermarket maintenance and appearance. The Construction Products segment supplies engineered fastening systems and solutions. The Specialty Products segment produces beverage packaging equipment and consumables, product coding and marking equipment and consumables, and appliance components and fasteners.

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