Critical Contrast: Graham (GHM) vs. Illinois Tool Works (ITW)

Illinois Tool Works (NYSE: ITW) and Graham (NYSE:GHM) are both industrial products companies, but which is the superior investment? We will contrast the two companies based on the strength of their analyst recommendations, dividends, earnings, profitability, valuation, institutional ownership and risk.

Dividends

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Illinois Tool Works pays an annual dividend of $3.12 per share and has a dividend yield of 2.0%. Graham pays an annual dividend of $0.36 per share and has a dividend yield of 1.7%. Illinois Tool Works pays out 47.3% of its earnings in the form of a dividend. Illinois Tool Works has raised its dividend for 54 consecutive years. Illinois Tool Works is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.



Institutional and Insider Ownership

77.6% of Illinois Tool Works shares are held by institutional investors. Comparatively, 77.3% of Graham shares are held by institutional investors. 0.8% of Illinois Tool Works shares are held by insiders. Comparatively, 3.3% of Graham 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.

Profitability

This table compares Illinois Tool Works and Graham’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Illinois Tool Works 11.79% 48.42% 14.17%
Graham -10.96% 2.67% 2.03%

Analyst Recommendations

This is a summary of current ratings for Illinois Tool Works and Graham, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Illinois Tool Works 0 9 7 1 2.53
Graham 0 0 0 0 N/A

Illinois Tool Works presently has a consensus target price of $174.38, suggesting a potential upside of 9.20%. Given Illinois Tool Works’ higher possible upside, equities analysts plainly believe Illinois Tool Works is more favorable than Graham.

Volatility & Risk

Illinois Tool Works has a beta of 1.24, meaning that its share price is 24% more volatile than the S&P 500. Comparatively, Graham has a beta of 0.81, meaning that its share price is 19% less volatile than the S&P 500.

Valuation and Earnings

This table compares Illinois Tool Works and Graham’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Illinois Tool Works $14.31 billion 3.81 $1.69 billion $6.59 24.23
Graham $91.77 million 2.28 $5.02 million N/A N/A

Illinois Tool Works has higher revenue and earnings than Graham.

Summary

Illinois Tool Works beats Graham on 13 of the 16 factors compared between the two stocks.

Illinois Tool Works Company Profile

Illinois Tool Works Inc. is a manufacturer of industrial products and equipment. The Company operates through seven segments. The Automotive OEM segment produces components and fasteners for automotive-related applications. The Food Equipment segment offers commercial food equipment. The Test & Measurement and Electronics segment produces test and measurement, and electronic manufacturing and maintenance, repair and operations (MRO) solutions. The Welding segment produces welding equipment, consumables and accessories for industrial and commercial applications. The Polymers & Fluids segment produces adhesives, sealants, lubrication and cutting fluids, and fluids and polymers for auto aftermarket maintenance and appearance. The Construction Products segment supplies engineered fastening systems and solutions. The Specialty Products segment produces beverage packaging equipment and consumables, product coding and marking equipment and consumables, and appliance components and fasteners.

Graham Company Profile

Graham Corporation designs, manufactures and sells critical equipment for the energy, defense and chemical/petrochemical industries. The Company designs and manufactures custom-engineered ejectors, vacuum pumping systems, surface condensers and vacuum systems. It is a nuclear code accredited fabrication and specialty machining company. It supplies components used inside reactor vessels and outside containment vessels of nuclear power facilities. Its equipment is found in applications, such as metal refining, pulp and paper processing, water heating, refrigeration, desalination, food processing, pharmaceutical, heating, ventilating and air conditioning. For the defense industry, its equipment is used in nuclear propulsion power systems for the United States Navy. The Company’s products are used in a range of industrial process applications in energy markets, including petroleum refining, defense, chemical and petrochemical processing, power generation/alternative energy and other.

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