Arconic (ARNC) & Mercury Systems (MRCY) Critical Comparison

Arconic (NYSE: ARNC) and Mercury Systems (NASDAQ:MRCY) are both mid-cap industrials companies, but which is the better business? We will contrast the two businesses based on the strength of their dividends, risk, earnings, institutional ownership, analyst recommendations, valuation and profitability.

Profitability

This table compares Arconic and Mercury Systems’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Arconic -4.70% 9.71% 2.73%
Mercury Systems 9.14% 6.51% 5.12%

Analyst Ratings

This is a breakdown of current ratings and price targets for Arconic and Mercury Systems, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Arconic 0 2 5 0 2.71
Mercury Systems 0 2 5 0 2.71

Arconic presently has a consensus target price of $30.00, indicating a potential downside of 2.72%. Mercury Systems has a consensus target price of $52.20, indicating a potential upside of 1.44%. Given Mercury Systems’ higher probable upside, analysts plainly believe Mercury Systems is more favorable than Arconic.

Dividends

Arconic pays an annual dividend of $0.24 per share and has a dividend yield of 0.8%. Mercury Systems does not pay a dividend. Arconic pays out -11.2% of its earnings in the form of a dividend.

Volatility & Risk

Arconic has a beta of 0.85, indicating that its stock price is 15% less volatile than the S&P 500. Comparatively, Mercury Systems has a beta of 0.23, indicating that its stock price is 77% less volatile than the S&P 500.

Insider and Institutional Ownership

74.6% of Arconic shares are owned by institutional investors. Comparatively, 96.3% of Mercury Systems shares are owned by institutional investors. 0.1% of Arconic shares are owned by insiders. Comparatively, 3.5% of Mercury Systems shares are owned by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock will outperform the market over the long term.

Valuation and Earnings

This table compares Arconic and Mercury Systems’ top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Arconic $12.39 billion 1.20 -$941.00 million ($2.15) -14.34
Mercury Systems $408.59 million 6.08 $24.87 million $0.86 59.84

Mercury Systems has lower revenue, but higher earnings than Arconic. Arconic is trading at a lower price-to-earnings ratio than Mercury Systems, indicating that it is currently the more affordable of the two stocks.

Summary

Mercury Systems beats Arconic on 9 of the 14 factors compared between the two stocks.

Arconic Company Profile

Arconic Inc., formerly Alcoa Inc., is engaged in lightweight metals engineering and manufacturing. The Company operates through three segments: Global Rolled Products, Engineered Products and Solutions, and Transportation and Construction Solutions. Its multi-material products, which include aluminum, titanium and nickel, are used around the world in markets, such as aerospace, automotive, commercial transportation and packaging. The Global Rolled Products segment produces a range of aluminum sheet and plate products for the aerospace, automotive, commercial transportation, brazing and industrial markets. The Engineered Products and Solutions segment develops and manufactures products for the aerospace (commercial and defense), commercial transportation and power generation end markets. The Transportation and Construction Solutions segment produces products that are used in the non-residential building and construction and commercial transportation end markets.

Mercury Systems Company Profile

Mercury Systems, Inc. is a commercial provider of secure processing subsystems designed and made in the United States. The Company’s solutions support a range of defense and intelligence programs. Its technologies include embedded processing modules and subsystems, radio frequency (RF) and microwave multi-function assemblies, as well as subsystems, and RF and microwave components. It designs and builds RF and microwave components and subsystems for the electronic warfare (EW), signals intelligence (SIGINT) and other communications requirements and applications. It offers analyst services and systems engineering support, consulting, maintenance and other support, testing and installation. It designs, markets and sells software and middleware environments for the development and execution of signal and image processing applications on a range of heterogeneous and multi-computing platforms. It also offers solutions in mission computing, safety-critical avionics and platform management.

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