Contrasting KEMET (KEM) and Transcat (TRNS)

KEMET (NYSE: KEM) and Transcat (NASDAQ:TRNS) are both small-cap industrials companies, but which is the better stock? We will contrast the two companies based on the strength of their valuation, dividends, risk, institutional ownership, earnings, analyst recommendations and profitability.

Profitability

This table compares KEMET and Transcat’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
KEMET 28.33% 22.51% 7.54%
Transcat 3.24% 10.03% 4.94%

Institutional and Insider Ownership

69.0% of KEMET shares are held by institutional investors. Comparatively, 52.9% of Transcat shares are held by institutional investors. 3.9% of KEMET shares are held by insiders. Comparatively, 8.8% of Transcat shares are held by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.

Analyst Ratings

This is a summary of recent ratings for KEMET and Transcat, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
KEMET 0 1 1 0 2.50
Transcat 0 0 3 0 3.00

KEMET currently has a consensus price target of $18.38, indicating a potential upside of 0.19%. Transcat has a consensus price target of $20.00, indicating a potential upside of 28.21%. Given Transcat’s stronger consensus rating and higher probable upside, analysts plainly believe Transcat is more favorable than KEMET.

Earnings & Valuation

This table compares KEMET and Transcat’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
KEMET $757.79 million 1.37 $47.98 million $4.99 3.68
Transcat $143.90 million 0.78 $4.52 million $0.68 22.94

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

Volatility & Risk

KEMET has a beta of 3.63, suggesting that its share price is 263% more volatile than the S&P 500. Comparatively, Transcat has a beta of 0.4, suggesting that its share price is 60% less volatile than the S&P 500.

Summary

KEMET beats Transcat on 9 of the 14 factors compared between the two stocks.

About KEMET

KEMET Corporation (KEMET) is a manufacturer of passive electronic components. The Company operates in two segments: Solid Capacitors, and Film and Electrolytic. The Solid Capacitors segment primarily produces tantalum, aluminum, polymer and ceramic capacitors. Solid Capacitors also produces tantalum powder used in the production of tantalum capacitors. The Film and Electrolytic Business Group produces film, paper and wet aluminum electrolytic capacitors. It also designs and produces EMI Filters. The Company’s product offerings include surface mount, which are attached directly to the circuit board; leaded capacitors, which are attached to the circuit board using lead wires, and chassis-mount and other pin-through-hole board-mount capacitors, which utilize attachment methods, such as screw terminal and snap-in. The Company sells its products to a range of original equipment manufacturers (OEMs) and electronics manufacturing services (EMS) providers.

About Transcat

Transcat, Inc. is a provider of calibration and laboratory instrument services and a distributor of professional grade test, measurement and control instrumentation. The Company conducts its business through two segments: service (Service) and distribution (Distribution). Through the Service segment, the Company offers calibration, repair, inspection, analytical qualifications, preventative maintenance and other related services, a majority of which are processed through its asset management system, CalTrak (CalTrak). Through its Distribution segment, the Company markets, sells and rents national brand instruments to customers around the globe. The Company is focused on providing its services and products to the life science industries, which include pharmaceutical, biotechnology, medical device manufacturing and other Food and Drug Administration (FDA)-regulated businesses.

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