Critical Survey: Parker Hannifin (PH) versus Watts Water Technologies (WTS)

Parker Hannifin (NYSE: PH) and Watts Water Technologies (NYSE:WTS) are both industrial products companies, but which is the superior investment? We will contrast the two businesses based on the strength of their earnings, risk, analyst recommendations, profitability, valuation, dividends and institutional ownership.

Earnings & Valuation

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This table compares Parker Hannifin and Watts Water Technologies’ top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Parker Hannifin $12.03 billion 1.85 $983.41 million $8.11 20.65
Watts Water Technologies $1.46 billion 1.76 $73.10 million $3.02 24.92

Parker Hannifin has higher revenue and earnings than Watts Water Technologies. Parker Hannifin is trading at a lower price-to-earnings ratio than Watts Water Technologies, indicating that it is currently the more affordable of the two stocks.

Institutional & Insider Ownership

81.6% of Parker Hannifin shares are owned by institutional investors. Comparatively, 77.2% of Watts Water Technologies shares are owned by institutional investors. 1.1% of Parker Hannifin shares are owned by company insiders. Comparatively, 1.1% of Watts Water Technologies shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Analyst Recommendations

This is a breakdown of recent ratings for Parker Hannifin and Watts Water Technologies, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Parker Hannifin 0 7 8 0 2.53
Watts Water Technologies 0 6 3 0 2.33

Parker Hannifin currently has a consensus price target of $200.53, suggesting a potential upside of 19.76%. Watts Water Technologies has a consensus price target of $79.50, suggesting a potential upside of 5.65%. Given Parker Hannifin’s stronger consensus rating and higher probable upside, analysts clearly believe Parker Hannifin is more favorable than Watts Water Technologies.

Risk & Volatility

Parker Hannifin has a beta of 1.42, meaning that its stock price is 42% more volatile than the S&P 500. Comparatively, Watts Water Technologies has a beta of 1.1, meaning that its stock price is 10% more volatile than the S&P 500.

Dividends

Parker Hannifin pays an annual dividend of $2.64 per share and has a dividend yield of 1.6%. Watts Water Technologies pays an annual dividend of $0.76 per share and has a dividend yield of 1.0%. Parker Hannifin pays out 32.6% of its earnings in the form of a dividend. Watts Water Technologies pays out 25.2% 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. Watts Water Technologies has raised its dividend for 5 consecutive years.

Profitability

This table compares Parker Hannifin and Watts Water Technologies’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Parker Hannifin 6.54% 23.15% 7.80%
Watts Water Technologies 5.02% 12.93% 6.02%

Summary

Parker Hannifin beats Watts Water Technologies on 14 of the 17 factors compared between the two stocks.

About Parker Hannifin

Parker-Hannifin Corporation manufactures and sells motion and control technologies and systems for various mobile, industrial, and aerospace markets worldwide. The company operates in two segments, Diversified Industrial and Aerospace Systems. The Diversified Industrial segment provides static and dynamic sealing devices; filters, systems, and diagnostics solutions to monitor and remove contaminants from fuel, air, oil, water, and other liquids and gases; connectors, which control, transmit, and contain fluid; hydraulic, pneumatic, and electromechanical components and systems for builders and users of industrial and mobile machinery and equipment; and critical flow components for process instrumentation, healthcare, and ultra-high-purity applications, as well as components for use in refrigeration and air conditioning systems, and in fluid control applications for processing, fuel dispensing, beverage dispensing, and mobile emissions. This segment sells its products to original equipment manufacturers and their replacement markets in manufacturing, packaging, processing, transportation, mobile construction, refrigeration and air conditioning, agricultural, and military machinery and equipment industries. The Aerospace Systems segment offers products for use in commercial and military airframe and engine programs, including control actuation systems and components, engine systems and components, fluid conveyance systems and components, fuel systems and components, fuel tank inserting systems, hydraulic systems and components, lubrication components, pneumatic control components, power conditioning and management systems, thermal management products, and wheels and brakes. This segment markets its products directly to original equipment manufacturers and end users. The company markets its products through direct-sales employees, independent distributors, and sales representatives. Parker-Hannifin Corporation was founded in 1918 and is headquartered in Cleveland, Ohio.

About Watts Water Technologies

Watts Water Technologies, Inc. is a supplier of products and solutions that manage and conserve the flow of fluids and energy into, through and out of buildings in the residential and commercial markets. The Company, through its subsidiary, Watts Regulator Co., is engaged in manufacturing products and systems focused on the control, conservation and quality of water, and safety of the people using it. Its segments include Americas, Middle East and Africa and Asia-Pacific. It four product lines include: residential and commercial flow control products, which include products for plumbing and hot water applications; heating, ventilation and air conditioning and gas products, which include boilers, water heaters and heating solutions; drainage and water re-use products, which include drainage products and engineered rain water harvesting solutions, and water quality products, which include point-of-use and point-of-entry water filtration, conditioning and scale prevention systems.

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