Comparing Emerson Electric (EMR) & MTS Systems (MTSC)

Emerson Electric (NYSE: EMR) and MTS Systems (NASDAQ:MTSC) are both industrials companies, but which is the superior investment? We will compare the two businesses based on the strength of their profitability, dividends, institutional ownership, valuation, risk, analyst recommendations and earnings.

Analyst Ratings

This is a breakdown of current recommendations and price targets for Emerson Electric and MTS Systems, as provided by MarketBeat.

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

Emerson Electric presently has a consensus target price of $67.58, indicating a potential downside of 7.60%. MTS Systems has a consensus target price of $65.50, indicating a potential upside of 21.63%. Given MTS Systems’ stronger consensus rating and higher possible upside, analysts clearly believe MTS Systems is more favorable than Emerson Electric.

Profitability

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

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

Dividends

Emerson Electric pays an annual dividend of $1.94 per share and has a dividend yield of 2.7%. MTS Systems pays an annual dividend of $1.20 per share and has a dividend yield of 2.2%. 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. 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. MTS Systems has raised its dividend for 61 consecutive years. Emerson Electric is clearly the better dividend stock, given its higher yield and lower payout ratio.

Valuation & Earnings

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

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Emerson Electric $15.26 billion 3.06 $1.52 billion $2.56 28.57
MTS Systems $787.96 million 1.22 $25.08 million $1.31 41.11

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.

Volatility and Risk

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

Insider and Institutional Ownership

69.2% of Emerson Electric shares are owned by institutional investors. Comparatively, 97.8% of MTS Systems shares are owned by institutional investors. 0.8% of Emerson Electric shares are owned by company insiders. Comparatively, 1.8% of MTS Systems shares are owned 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

Emerson Electric beats MTS Systems on 10 of the 17 factors compared between the two stocks.

About Emerson Electric

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.

About MTS Systems

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.

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