Contrasting Precision Castparts (PCP) & Hexcel (HXL)

Precision Castparts (NYSE: PCP) and Hexcel (NYSE:HXL) are both industrials companies, but which is the better investment? We will contrast the two businesses based on the strength of their risk, profitability, valuation, analyst recommendations, dividends, earnings and institutional ownership.

Analyst Recommendations

This is a breakdown of recent recommendations and price targets for Precision Castparts and Hexcel, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Precision Castparts 0 0 0 0 N/A
Hexcel 0 5 5 0 2.50

Hexcel has a consensus target price of $64.78, suggesting a potential downside of 3.86%. Given Hexcel’s higher possible upside, analysts plainly believe Hexcel is more favorable than Precision Castparts.

Profitability

This table compares Precision Castparts and Hexcel’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Precision Castparts 15.17% 12.16% 6.86%
Hexcel 14.39% 17.86% 9.19%

Valuation & Earnings

This table compares Precision Castparts and Hexcel’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Precision Castparts N/A N/A N/A $9.53 24.65
Hexcel $1.97 billion 3.07 $284.00 million $2.85 23.64

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

Institutional and Insider Ownership

99.2% of Hexcel shares are held by institutional investors. 2.1% of Hexcel shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Dividends

Precision Castparts pays an annual dividend of $0.12 per share and has a dividend yield of 0.1%. Hexcel pays an annual dividend of $0.50 per share and has a dividend yield of 0.7%. Precision Castparts pays out 1.3% of its earnings in the form of a dividend. Hexcel pays out 17.5% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Precision Castparts has raised its dividend for 2 consecutive years.

Summary

Hexcel beats Precision Castparts on 8 of the 13 factors compared between the two stocks.

Precision Castparts Company Profile

Precision Castparts Corp. is a manufacturer of metal components and products. The Company has three business segments: Investment Cast Products, Forged Products and Airframe Products. The Company’s Investment Cast Products segment manufactures investment castings and provides related investment casting materials and alloys, for aircraft engines, industrial gas turbine (IGT) engines, airframes, armaments, medical prostheses, unmanned aerial vehicles and other industrial applications. The Company’s Forged Products segment manufactures forged components from titanium and nickel-based alloys, and nickel, titanium and cobalt-based alloys for aerospace and non-aerospace markets, which include products for oil and gas, chemical processing and pollution control applications. The Company’s Airframe Products segment manufactures fasteners, fastener systems, fluid fittings, aerostructures and precision components, primarily for aerospace applications.

Hexcel Company Profile

Hexcel Corporation is a composites company. The Company develops, manufactures, and markets lightweight, structural materials, including carbon fibers, specialty reinforcements, prepregs and other fiber-reinforced matrix materials, honeycomb, adhesives, engineered honeycomb and structures, for use in Commercial Aerospace, Space and Defense and Industrial markets. It operates in two segments: Composite Materials and Engineered Products. The Composite Materials segment consists of its carbon fiber, specialty reinforcements, resins, prepregs and other fiber-reinforced matrix materials, and honeycomb core product lines. The Engineered Products segment consists of lightweight structures, molded components, engineered core and honeycomb products with added functionality. Its products are used in a range of end applications, such as commercial and military aircraft, space launch vehicles and satellites, wind turbine blades, automotive, and recreational products.

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