Transcat (TRNS) versus Methode Electronics (NYSE:MEI) Critical Comparison

Transcat (NASDAQ: TRNS) and Methode Electronics (NYSE:MEI) are both small-cap computer and technology companies, but which is the superior investment? We will contrast the two businesses based on the strength of their institutional ownership, valuation, earnings, risk, dividends, analyst recommendations and profitability.

Analyst Ratings

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This is a summary of recent recommendations for Transcat and Methode Electronics, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Transcat 0 0 3 0 3.00
Methode Electronics 0 0 3 0 3.00

Transcat currently has a consensus target price of $20.00, suggesting a potential upside of 32.02%. Methode Electronics has a consensus target price of $49.67, suggesting a potential upside of 29.17%. Given Transcat’s higher probable upside, equities research analysts clearly believe Transcat is more favorable than Methode Electronics.

Profitability

This table compares Transcat and Methode Electronics’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Transcat 3.24% 10.03% 4.94%
Methode Electronics 4.95% 17.84% 12.51%

Institutional & Insider Ownership

55.2% of Transcat shares are held by institutional investors. Comparatively, 96.0% of Methode Electronics shares are held by institutional investors. 8.8% of Transcat shares are held by company insiders. Comparatively, 4.4% of Methode Electronics shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Dividends

Methode Electronics pays an annual dividend of $0.44 per share and has a dividend yield of 1.1%. Transcat does not pay a dividend. Methode Electronics pays out 17.3% of its earnings in the form of a dividend.

Volatility & Risk

Transcat has a beta of 0.42, meaning that its stock price is 58% less volatile than the S&P 500. Comparatively, Methode Electronics has a beta of 0.88, meaning that its stock price is 12% less volatile than the S&P 500.

Earnings & Valuation

This table compares Transcat and Methode Electronics’ gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Transcat $143.90 million 0.75 $4.52 million $0.64 23.67
Methode Electronics $816.50 million 1.74 $92.90 million $2.55 15.08

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

Summary

Methode Electronics beats Transcat on 10 of the 14 factors compared between the two stocks.

About Transcat

Transcat, Inc. provides calibration and laboratory instrument services in the United States, Canada, and internationally. It operates in two segments, Service and Distribution. The Service segment offers calibration, repair, inspection, analytical qualifications, preventative maintenance, consulting, and other related services. This segment also provides CalTrak, a proprietary document and asset management system that is used to integrate and manage the workflow of its calibration service centers and customers' assets; CalTrak Online, which provides its customers with Web-based asset management capability, as well as an off-site archive of calibration and other service records; and Compliance, Control and Cost, a cloud-based customer portal and asset management tool. The Distribution segment distributes approximately 100,000 test, measurement, and control instruments for customers' test and measurement instrumentation needs. This segment markets and sells its products through Website, digital and print advertising, proactive outbound sales, and an inbound call center. The company provides services and products to highly regulated industries, principally life science, which includes companies in the pharmaceutical, biotechnology, medical device, and other FDA-regulated industries; and additional industries, including industrial manufacturing, oil and gas and alternative energy, aerospace and defense, and other industries that require accuracy in processes and confirmation of the capabilities of their equipment. Transcat, Inc. was founded in 1964 and is headquartered in Rochester, New York.

About Methode Electronics

Methode Electronics, Inc. designs, manufactures, and markets component and subsystem devices worldwide. The company operates through four segments: Automotive, Interface, Power Products, and Other. The Automotive segment offers electronic and electro-mechanical devices, and related products to automobile original equipment manufacturers directly or through their tiered suppliers. Its products include integrated center consoles, hidden switches, ergonomic switches, transmission lead frames, and sensors, which incorporate magneto-elastic sensing and other technologies that monitor the operation or status of a component or system. The Interface segment provides various copper and fiber-optic interface and interface solutions for the aerospace, appliance, commercial food service, construction, consumer, material handling, medical, military, mining, point-of-sale, and telecommunication markets. Its solutions consist of conductive polymers, industrial safety radio remote controls, optical and copper transceivers, and solid-state field-effect consumer touch panels; and services include the design and installation of fiber optic and copper infrastructure systems, and manufacturing active and passive optical components. The Power Products segment manufactures braided flexible cables, current-carrying laminated bus bars and devices, custom power-product assemblies, high-current low voltage flexible power cabling systems, and powder coated bus bars that are used in aerospace, computer, industrial and power conversion, military, telecommunication, and transportation markets and applications. The Other segment offers medical devices, inverters and battery systems, and insulated gate bipolar transistor solutions. Methode Electronics, Inc. was founded in 1946 and is headquartered in Chicago, Illinois.

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