AAON (NASDAQ:AAON) & Thermon Group Holdings (THR) Critical Analysis

AAON (NASDAQ: AAON) and Thermon Group Holdings (NYSE:THR) are both small-cap construction companies, but which is the better investment? We will contrast the two businesses based on the strength of their profitabiliy, analyst recommendations, earnings, valuation, institutional ownership, risk and dividends.

Profitability

This table compares AAON and Thermon Group Holdings’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
AAON	13.43%	25.28%	19.93%
Thermon Group Holdings	5.54%	4.60%	3.11%

Volatility and Risk

AAON has a beta of 0.98, suggesting that its share price is 2% less volatile than the S&P 500. Comparatively, Thermon Group Holdings has a beta of 1, suggesting that its share price has a similar volatility profile to the S&P 500.

Valuation & Earnings

This table compares AAON and Thermon Group Holdings’ gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	EBITDA	Earnings Per Share	Price/Earnings Ratio
AAON	$384.63 million	4.79	$91.19 million	$0.96	36.46
Thermon Group Holdings	$264.13 million	2.25	$39.78 million	$0.45	40.76

AAON has higher revenue and earnings than Thermon Group Holdings. AAON is trading at a lower price-to-earnings ratio than Thermon Group Holdings, indicating that it is currently the more affordable of the two stocks.

Dividends

AAON pays an annual dividend of $0.26 per share and has a dividend yield of 0.7%. Thermon Group Holdings does not pay a dividend. AAON pays out 27.1% of its earnings in the form of a dividend.

Analyst Ratings

This is a summary of current recommendations and price targets for AAON and Thermon Group Holdings, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
AAON	0	0	1	0	3.00
Thermon Group Holdings	0	2	2	0	2.50

AAON presently has a consensus target price of $30.00, suggesting a potential downside of 14.29%. Thermon Group Holdings has a consensus target price of $21.00, suggesting a potential upside of 14.50%. Given Thermon Group Holdings’ higher probable upside, analysts clearly believe Thermon Group Holdings is more favorable than AAON.

Insider & Institutional Ownership

66.1% of AAON shares are held by institutional investors. 22.3% of AAON shares are held by insiders. Comparatively, 1.2% of Thermon Group Holdings shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Summary

AAON beats Thermon Group Holdings on 11 of the 16 factors compared between the two stocks.

AAON Company Profile

AAON, Inc. is engaged in the engineering, manufacturing, marketing and sale of air conditioning and heating equipment consisting of standard, semi-custom and custom rooftop units, chillers, packaged outdoor mechanical rooms, air handling units, makeup air units, energy recovery units, condensing units, geothermal/water-source heat pumps and coils. Its products serve the commercial and industrial new construction and replacement markets. Its rooftop and condensing unit markets consist of units installed on commercial or industrial structures of less than 10 stories in height. Its air handling units, self-contained units, geothermal/water-source heat pumps, chillers, packaged outdoor mechanical rooms and coils are applicable to all sizes of commercial and industrial buildings. The replacement market consists of products installed to replace existing units/components that are worn or damaged.

Thermon Group Holdings Company Profile

Thermon Group Holdings, Inc. is a provider of engineered thermal solutions for process industries. The Company operates through four segments based on four geographic countries or regions: United States, Canada, Europe and Asia. Its product portfolio includes self-regulating and power limiting heating cables, which change heat output as pipe temperature changes, as well as constant wattage heating cables; mineral insulated (MI) cable; skin effect trace heater; heat traced tube bundles for environmental gas sampling systems; heat transfer compounds and steam tracers for steam tracing solutions; control and monitoring systems for electric tracing of pipes, tanks, hoppers and instrument sampling systems; turnkey solutions that provide solutions for heat tracing, including design, optimization, installation and ongoing maintenance; products and services, such as heating, sensing, monitoring, controlling and calibration tools, and temporary electric power distribution and lighting products.