Contrasting MSC Industrial Direct (MSM) & Systemax (SYX)

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

Volatility and Risk

MSC Industrial Direct has a beta of 0.66, indicating that its stock price is 34% less volatile than the S&P 500. Comparatively, Systemax has a beta of 0.2, indicating that its stock price is 80% less volatile than the S&P 500.

Insider and Institutional Ownership

75.9% of MSC Industrial Direct shares are held by institutional investors. Comparatively, 28.4% of Systemax shares are held by institutional investors. 31.3% of MSC Industrial Direct shares are held by insiders. Comparatively, 68.0% of Systemax shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Dividends

MSC Industrial Direct pays an annual dividend of $2.52 per share and has a dividend yield of 3.0%. Systemax pays an annual dividend of $0.44 per share and has a dividend yield of 1.6%. MSC Industrial Direct pays out 49.6% of its earnings in the form of a dividend. Systemax pays out 33.8% 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. MSC Industrial Direct has raised its dividend for 7 consecutive years. MSC Industrial Direct is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Ratings

This is a breakdown of current recommendations for MSC Industrial Direct and Systemax, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
MSC Industrial Direct 0 8 7 0 2.47
Systemax 0 0 2 0 3.00

MSC Industrial Direct presently has a consensus target price of $100.23, indicating a potential upside of 18.91%. Systemax has a consensus target price of $45.00, indicating a potential upside of 60.26%. Given Systemax’s stronger consensus rating and higher probable upside, analysts plainly believe Systemax is more favorable than MSC Industrial Direct.

Profitability

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

Net Margins Return on Equity Return on Assets
MSC Industrial Direct 10.28% 21.36% 13.06%
Systemax 19.10% 23.98% 11.61%

Valuation and Earnings

This table compares MSC Industrial Direct and Systemax’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 $3.20 billion 1.47 $329.22 million $5.08 16.59
Systemax $1.27 billion 0.83 $40.40 million $1.30 21.60

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

Summary

MSC Industrial Direct beats Systemax on 10 of the 17 factors compared between the two stocks.

MSC Industrial Direct Company Profile

MSC Industrial Direct Co., Inc., together with its subsidiaries, distributes metalworking and maintenance, repair, and operations (MRO) products 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 products, 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 1,645,000 stock-keeping units through its catalogs; brochures; e-commerce channels, including its Website, mscdirect.com; inventory management solutions; and call-centers and branches. The company serves through its distribution network of 100 branch offices and 12 customer fulfillment centers. It serves individual machine shops, Fortune 100 manufacturing companies, and government agencies. The company was founded in 1941 and is headquartered in Melville, New York.

Systemax Company Profile

Systemax Inc. operates as a direct marketer of brand name and private label products. Its Industrial Products Group segment sells a range of maintenance, repair, and operation products, including storage and shelving, material handling, janitorial and maintenance, furniture and office, HVAC/R and fans, workbench and shop desks, safety and security, outdoor and grounds maintenance, tools and instruments, office and school supplies, plumbing and pumps, packaging and supplies, electrical and lighting, food service and appliances, raw materials and building supplies, motors and power transmission, pneumatics and hydraulics, medical and laboratory equipment, metalworking and cutting tools, vehicle maintenance, and fasteners and hardware in North America. This segment offers its products under the Global, GlobalIndustrial.com, Nexel Relius, Relius Solutions, Paramount, and Interion brand names. The company's Europe Technology Products Group segment sells information and communication technology products, such as servers-storage and backup, desktop computers, laptops, tablets, monitors, and mobile devices; computer parts and memory; computer components and accessories; networking and security; software; and electronics, and commercial and home networking products. This segment also provides TV and video products; audio products; cameras and surveillance products; GPS products; cell phones; video games; and home and electronics accessories. The company offers its products to for-profit businesses, educational organizations, and government entities through its relationship marketers, catalog mailings, and proprietary Internet Websites. Systemax Inc. was founded in 1949 and is headquartered in Port Washington, New York.

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