Financial Review: MSC Industrial Direct (MSM) vs. MRC Global (MRC)

MSC Industrial Direct (NYSE: MSM) and MRC Global (NYSE:MRC) are both industrial products companies, but which is the superior business? We will compare the two businesses based on the strength of their earnings, dividends, risk, institutional ownership, profitability, analyst recommendations and valuation.

Dividends

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MSC Industrial Direct pays an annual dividend of $2.32 per share and has a dividend yield of 2.5%. MRC Global does not pay a dividend. MSC Industrial Direct pays out 57.3% of its earnings in the form of a dividend. MSC Industrial Direct has raised its dividend for 7 consecutive years.

Analyst Ratings

This is a summary of recent recommendations and price targets for MSC Industrial Direct and MRC Global, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
MSC Industrial Direct 0 9 5 0 2.36
MRC Global 0 3 7 0 2.70

MSC Industrial Direct presently has a consensus target price of $97.50, suggesting a potential upside of 6.09%. MRC Global has a consensus target price of $20.56, suggesting a potential upside of 18.41%. Given MRC Global’s stronger consensus rating and higher possible upside, analysts plainly believe MRC Global is more favorable than MSC Industrial Direct.

Volatility and Risk

MSC Industrial Direct has a beta of 0.59, suggesting that its share price is 41% less volatile than the S&P 500. Comparatively, MRC Global has a beta of 1.49, suggesting that its share price is 49% more volatile than the S&P 500.

Insider and Institutional Ownership

75.4% of MSC Industrial Direct shares are held by institutional investors. Comparatively, 98.4% of MRC Global shares are held by institutional investors. 31.4% of MSC Industrial Direct shares are held by insiders. Comparatively, 7.0% of MRC Global shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock is poised for long-term growth.

Profitability

This table compares MSC Industrial Direct and MRC Global’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
MSC Industrial Direct 7.97% 19.37% 11.40%
MRC Global 1.37% 3.54% 1.18%

Valuation and Earnings

This table compares MSC Industrial Direct and MRC Global’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
MSC Industrial Direct $2.89 billion 1.80 $231.43 million $4.05 22.69
MRC Global $3.65 billion 0.43 $50.00 million $0.03 578.67

MSC Industrial Direct has higher earnings, but lower revenue than MRC Global. MSC Industrial Direct is trading at a lower price-to-earnings ratio than MRC Global, indicating that it is currently the more affordable of the two stocks.

Summary

MSC Industrial Direct beats MRC Global on 9 of the 17 factors compared between the two stocks.

MSC Industrial Direct Company Profile

MSC Industrial Direct Co., Inc., together with its subsidiaries, distributes various ranges of metalworking and maintenance, repair, and operations (MRO) products primarily in the United States, Canada, and the United Kingdom. The company's MRO products comprise cutting tools, measuring instruments, tooling components, metalworking products, fasteners, flat stock, raw materials, abrasives, machinery hand and power tools, safety and janitorial supplies, plumbing supplies, materials handling products, power transmission components, and electrical supplies. It offers approximately 1,565,000 stock-keeping units through its catalogs; brochures; eCommerce channels, including its Website, mscdirect.com; and call-centers and branches. The company serves primarily through its distribution network of 93 branch offices and 12 customer fulfillment centers. It serves individual machine shops, manufacturing companies, and government agencies. The company was founded in 1941 and is headquartered in Melville, New York.

MRC Global Company Profile

MRC Global Inc. is an industrial distributor of pipe, valves and fittings and related products and services to the energy industry. The Company’s segments include the U.S., Canada and International. Its U.S. segment includes the United States Eastern Region and Gulf Coast, and the United States Western Region. It provides services, such as product testing, manufacturer assessments, daily deliveries, volume purchasing, inventory and zone store management and warehousing, technical support, training, just-in-time delivery, truck stocking, order consolidation, product tagging and system interfaces customized to customer and supplier specifications for tracking and replenishing inventory, engineering of control packages, and valve inspection and repair. The Company’s principal product types include valves, automation, measurement and instrumentation; carbon steel fittings and flanges; stainless steel and alloy fittings, flanges and pipe; gas products; line pipe, and other.

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