Financial Review: Gates Industrial (NYSE:GTES) and Tennant (NYSE:TNC)

Gates Industrial (NYSE:GTES) and Tennant (NYSE:TNC) are both industrials companies, but which is the superior investment? We will compare the two businesses based on the strength of their earnings, risk, dividends, profitability, analyst recommendations, institutional ownership and valuation.

Insider & Institutional Ownership

98.5% of Gates Industrial shares are held by institutional investors. Comparatively, 93.3% of Tennant shares are held by institutional investors. 2.8% of Gates Industrial shares are held by insiders. Comparatively, 3.5% of Tennant shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Analyst Ratings

This is a breakdown of current recommendations and price targets for Gates Industrial and Tennant, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Gates Industrial	0	4	7	0	2.64
Tennant	0	2	1	1	2.75

Gates Industrial currently has a consensus price target of $31.00, suggesting a potential upside of 10.62%. Tennant has a consensus price target of $91.00, suggesting a potential upside of 3.91%. Given Gates Industrial’s higher possible upside, equities analysts plainly believe Gates Industrial is more favorable than Tennant.

Earnings and Valuation

This table compares Gates Industrial and Tennant”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Gates Industrial	$3.44 billion	2.07	$251.40 million	$0.96	29.19
Tennant	$1.20 billion	1.24	$43.80 million	$1.66	52.76

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

Profitability

This table compares Gates Industrial and Tennant’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Gates Industrial	7.23%	10.00%	5.15%
Tennant	2.55%	14.87%	7.17%

Volatility & Risk

Gates Industrial has a beta of 1.27, suggesting that its share price is 27% more volatile than the S&P 500. Comparatively, Tennant has a beta of 1.12, suggesting that its share price is 12% more volatile than the S&P 500.

Summary

Gates Industrial beats Tennant on 8 of the 15 factors compared between the two stocks.

About Gates Industrial

Gates Industrial Corporation PLC designs and manufactures power transmission equipment. Its products serves harsh and hazardous industries such as agriculture, construction, manufacturing and energy, to everyday consumer applications such as printers, power washers, automatic doors and vacuum cleaners and virtually every form of transportation.

About Tennant

Tennant Company, together with its subsidiaries, designs, manufactures, and markets floor cleaning equipment in the Americas, Europe, the Middle East, Africa, and the Asia Pacific. The company offers a suite of products, including floor maintenance and cleaning equipment, detergent-free and other sustainable cleaning technologies, aftermarket parts and consumables, equipment maintenance and repair services, and asset management solutions. It provides business solutions, such as financing, rental, and leasing programs, as well as machine-to-machine asset management solutions. The company offers its products under the Tennant, Nobles, Alfa Uma Empresa Tennant, IPC, Gaomei, and Rongen brands, as well as private-label brands. Its products are used in retail establishments and distribution centers; factories and warehouses; and public venues, such as arenas and stadiums, office buildings, schools and universities, hospitals and clinics, and other environments. The company markets its products to contract cleaners and businesses through direct sales and service organizations, as well as through a network of authorized distributors. Tennant Company was founded in 1870 and is headquartered in Eden Prairie, Minnesota.