Federal Signal (FSS) and Spartan Motors (SPAR) Head to Head Review

Federal Signal (NYSE: FSS) and Spartan Motors (NASDAQ:SPAR) are both small-cap multi-sector conglomerates companies, but which is the better stock? We will compare the two businesses based on the strength of their earnings, dividends, analyst recommendations, valuation, profitability, risk and institutional ownership.

Dividends

Federal Signal pays an annual dividend of $0.32 per share and has a dividend yield of 1.4%. Spartan Motors pays an annual dividend of $0.10 per share and has a dividend yield of 0.7%. Federal Signal pays out 37.6% of its earnings in the form of a dividend. Spartan Motors pays out 23.3% 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.

Profitability

This table compares Federal Signal and Spartan Motors’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Federal Signal 6.93% 12.83% 5.67%
Spartan Motors 2.98% 10.21% 5.51%

Volatility and Risk

Federal Signal has a beta of 1.15, meaning that its share price is 15% more volatile than the S&P 500. Comparatively, Spartan Motors has a beta of 0.61, meaning that its share price is 39% less volatile than the S&P 500.

Insider & Institutional Ownership

85.1% of Federal Signal shares are owned by institutional investors. Comparatively, 68.0% of Spartan Motors shares are owned by institutional investors. 4.3% of Federal Signal shares are owned by company insiders. Comparatively, 4.2% of Spartan Motors shares are owned by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Earnings and Valuation

This table compares Federal Signal and Spartan Motors’ gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Federal Signal $898.50 million 1.56 $61.60 million $0.85 27.40
Spartan Motors $707.10 million 0.75 $15.93 million $0.43 35.12

Federal Signal has higher revenue and earnings than Spartan Motors. Federal Signal is trading at a lower price-to-earnings ratio than Spartan Motors, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a summary of recent ratings and recommmendations for Federal Signal and Spartan Motors, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Federal Signal 0 1 1 0 2.50
Spartan Motors 0 0 4 0 3.00

Spartan Motors has a consensus target price of $20.00, suggesting a potential upside of 32.45%. Given Spartan Motors’ stronger consensus rating and higher probable upside, analysts plainly believe Spartan Motors is more favorable than Federal Signal.

Summary

Federal Signal beats Spartan Motors on 11 of the 16 factors compared between the two stocks.

About Federal Signal

Federal Signal Corporation, together with its subsidiaries, designs, manufactures, and supplies a suite of products and integrated solutions for municipal, governmental, industrial, and commercial customers in the United States, Canada, Europe, and internationally. It operates through two segments, Environmental Solutions Group and Safety and Security Systems Group. The Environmental Solutions Group segment offers a range of street sweeper vehicles, sewer cleaner and vacuum loader trucks, hydro-excavation trucks, and water blasting equipment under the Elgin, Vactor, Guzzler, Westech, and Jetstream brand names. Is also manufactures dump truck bodies and trailers for maintenance and infrastructure end-markets under the Ox Bodies, Crysteel, J-Craft, Duraclass, Rugby, and Travis brand names. In addition, this segment engages in the sale of parts, service and repair, equipment rental, and training activities under the FS Solutions brand. The Safety and Security Systems Group segment provides systems and products for campus and community alerting, emergency vehicles, first responder interoperable communications, and industrial communications, as well as command and municipal networked security. Its products include vehicle lightbars and sirens, public warning sirens, general alarm systems, public address systems, and public safety software. This segment sells its products under the Federal Signal, Federal Signal VAMA, and Victor brand names. The company sells its products through wholesaler, distributor, independent manufacturer representative, original equipment manufacturer, and direct sales force, as well as independent foreign distributor. Federal Signal Corporation was founded in 1901 and is headquartered in Oak Brook, Illinois.

About Spartan Motors

Spartan Motors, Inc., through its subsidiaries, engineers, manufactures, and sells heavy-duty and purpose-built specialty vehicles in the United States, Canada, South America, and Asia. It operates through three segments: Fleet Vehicles and Services, Emergency Response Vehicles, and Specialty Chassis and Vehicles. The Fleet Vehicles and Services segment provides walk-in vans, cutaway vans, truck bodies, and parts and accessories for use in e-commerce/last mile/parcel delivery, beverage and grocery delivery, mobile retail, and trades and construction industries under the Aeromaster, Velocity, Ultimate, Trademaster, Metromaster, Utilivan, Spartan Upfit Services, and Reach brands. This segment also installs specialty interior and exterior up-fit equipment for walk-in vans, truck bodies, and passenger vans under Specialty Up-fit name; and distributes related aftermarket parts and accessories. The Emergency Response Vehicles segment provides emergency response cabs and chassis, pumpers, aerial ladder components for fire trucks, rescue equipment, tankers, and parts and accessories under the Spartan, Smeal, Ladder Tower, and UST brands, as well as offers body, aerial, pump, drivetrain, and chassis repair and maintenance services. The Specialty Chassis and Vehicles segment offers motor home chassis; and defense and specialty chassis and vehicles, as well as provides related aftermarket parts and accessories, and maintenance and repair services. This segment also offers assembly services for Isuzu N-gas and F-series chassis. The company sells its products through a network of independent truck dealers, original equipment manufacturers, dealer distributors, leasing companies, and municipalities and other governmental entities, as well as to commercial and individual end users. Spartan Motors, Inc. was founded in 1975 and is headquartered in Charlotte, Michigan.

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