ITT (ITT) and Graco (GGG) Critical Analysis

ITT (NYSE: ITT) and Graco (NYSE:GGG) are both mid-cap multi-sector conglomerates companies, but which is the superior business? We will compare the two businesses based on the strength of their analyst recommendations, earnings, dividends, risk, institutional ownership, profitability and valuation.

Risk and Volatility

ITT has a beta of 1.56, indicating that its stock price is 56% more volatile than the S&P 500. Comparatively, Graco has a beta of 1.15, indicating that its stock price is 15% more volatile than the S&P 500.

Profitability

This table compares ITT and Graco’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
ITT 6.37% 14.98% 6.40%
Graco 17.99% 41.12% 20.66%

Valuation and Earnings

This table compares ITT and Graco’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
ITT $2.59 billion 1.85 $113.50 million $2.59 20.95
Graco $1.47 billion 5.26 $252.41 million $1.43 32.36

Graco has lower revenue, but higher earnings than ITT. ITT is trading at a lower price-to-earnings ratio than Graco, indicating that it is currently the more affordable of the two stocks.

Dividends

ITT pays an annual dividend of $0.54 per share and has a dividend yield of 1.0%. Graco pays an annual dividend of $0.53 per share and has a dividend yield of 1.1%. ITT pays out 20.8% of its earnings in the form of a dividend. Graco pays out 37.1% 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. ITT has increased its dividend for 5 consecutive years and Graco has increased its dividend for 13 consecutive years. Graco is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Institutional & Insider Ownership

93.9% of ITT shares are held by institutional investors. Comparatively, 87.0% of Graco shares are held by institutional investors. 1.0% of ITT shares are held by insiders. Comparatively, 5.1% of Graco shares are held by 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.

Analyst Recommendations

This is a breakdown of current ratings and price targets for ITT and Graco, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
ITT 1 1 8 0 2.70
Graco 0 9 1 0 2.10

ITT presently has a consensus target price of $55.50, indicating a potential upside of 2.30%. Graco has a consensus target price of $46.83, indicating a potential upside of 1.22%. Given ITT’s stronger consensus rating and higher possible upside, analysts plainly believe ITT is more favorable than Graco.

Summary

Graco beats ITT on 9 of the 17 factors compared between the two stocks.

ITT Company Profile

ITT Inc. manufactures and sells engineered critical components and customized technology solutions for the energy, transportation, and industrial markets worldwide. The company operates in three segments: Industrial Process, Motion Technologies, and Connect & Control Technologies. The Industrial Process segment designs and manufactures industrial pumps, valves, and plant optimization systems; and centrifugal pumps, vertical centrifugal pumps, twin screw and positive displacement pumps, and water systems, as well as aftermarket solutions, such as repairs and upgrades services. It serves various customers in industries, such as chemical, oil and gas, mining, and other industrial process markets. The Motion Technologies segment manufactures braking pads, shims, shock absorbers, and energy absorption components; and sealing technologies primarily for the transportation industry, including passenger cars, light- and heavy-duty commercial and military vehicles, buses, and rail. The Connect & Control Technologies segment designs and manufactures a range of engineered connectors and specialized control components for critical applications supporting various markets, including aerospace, defense, industrial, transportation, medical, and oil and gas. The connector product portfolio includes electrical connectors, such as circular, rectangular, radio frequency, fiber optic, D-sub miniature, micro-miniature, and cable assemblies; and control products consist of fuel and water pumps, valves, electro-mechanical rotary and linear actuators, and pressure, temperature, limit, and flow switches for various aircraft systems. ITT Inc. was founded in 1920 and is headquartered in White Plains, New York.

Graco Company Profile

Graco Inc. designs, manufactures, and markets systems and equipment used to move, measure, control, dispense, and spray fluid and powder materials worldwide. Its Industrial segment offers proportioning systems that are used to spray polyurethane foam and polyurea coatings; vapor-abrasive blasting equipment; equipment that pumps, meters, mixes, and dispenses sealant, adhesive, and composite materials; and gel coat equipment, chop and wet-out systems, resin transfer molding systems, and applicators. This segment also provides liquid finishing equipment; paint circulating and supply pumps; paint circulating advanced control systems; plural component coating proportioners; spare parts and accessories; and powder finishing products to coat powder finishing on metals under the Gema name. Its Process segment offers pumps to move chemicals, water, wastewater, petroleum, food, and other fluids; pressure valves used in the oil and natural gas industry, other industrial processes, and research facilities; and chemical injection pumping solutions for injection of chemicals into producing oil wells and pipelines. This segment also supplies pumps, hose reels, meters, valves, and accessories for fast oil change facilities, service garages, fleet service centers, automobile dealerships, auto parts stores, truck builders, and heavy equipment service centers; and systems, components, and accessories for the automatic lubrication of bearings, gears, and generators in industrial and commercial equipment, compressors, turbines, and on- and off-road vehicles. Its Contractor segment offers sprayers to apply paint to walls and other structures; and viscous coatings to roofs, and markings on roads, parking lots, athletic fields, and floors. It primarily sells its products through distributors, original equipment manufacturers, home center channels; and directly to end-users. The company was founded in 1926 and is headquartered in Minneapolis, Minnesota.

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