Critical Comparison: A. O. Smith (NYSE:AOS) and Toto (OTCMKTS:TOTDY)

Toto (OTCMKTS:TOTDY) and A. O. Smith (NYSE:AOS) are both industrials companies, but which is the better business? We will contrast the two companies based on the strength of their risk, institutional ownership, earnings, dividends, valuation, analyst recommendations and profitability.

Profitability

This table compares Toto and A. O. Smith’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Toto	N/A	N/A	N/A
A. O. Smith	13.15%	27.88%	15.21%

Analyst Ratings

This is a breakdown of current ratings and recommmendations for Toto and A. O. Smith, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Toto	0	1	0	0	2.00
A. O. Smith	2	5	2	0	2.00

A. O. Smith has a consensus target price of $67.75, suggesting a potential upside of 11.30%. Given A. O. Smith’s higher probable upside, analysts plainly believe A. O. Smith is more favorable than Toto.

Dividends

Toto pays an annual dividend of $0.43 per share and has a dividend yield of 1.1%. A. O. Smith pays an annual dividend of $1.44 per share and has a dividend yield of 2.4%. Toto pays out 0.2% of its earnings in the form of a dividend. A. O. Smith pays out 40.0% 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. A. O. Smith has increased its dividend for 31 consecutive years. A. O. Smith is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Earnings & Valuation

This table compares Toto and A. O. Smith”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Toto	N/A	N/A	N/A	$204.16	0.19
A. O. Smith	$3.83 billion	2.16	$546.20 million	$3.60	16.91

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

Institutional & Insider Ownership

0.1% of Toto shares are held by institutional investors. Comparatively, 76.1% of A. O. Smith shares are held by institutional investors. 0.5% of A. O. Smith shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock will outperform the market over the long term.

Summary

A. O. Smith beats Toto on 11 of the 13 factors compared between the two stocks.

About Toto

Toto Ltd. manufactures and sells bathroom and kitchen plumbing fixtures worldwide. It provides sanitary ware comprising toilet basins, urinals, sinks, washbasins, etc.; system toilets; toilet seats; plumbing accessories, etc.; bathtubs; unit bathrooms; and fittings consisting of various faucets, drain fittings, etc. The company also offers modular kitchens; bathroom vanity units; marbright artificial marble counters; bathroom ventilation, heating, and drying systems; and welfare equipment, etc. In addition, it provides green building materials, such as tiles, ceramic slabs, etc.; and ceramics. The company was formerly known as TOTO Kiki Ltd. and changed its name to Toto Ltd. in 2007. Toto Ltd. was incorporated in 1917 and is headquartered in Kitakyushu, Japan.

About A. O. Smith

A. O. Smith Corporation manufactures and markets residential and commercial gas and electric water heaters, boilers, heat pumps, tanks, and water treatment products in North America, China, Europe, and India. The company offers water heaters for residences, restaurants, hotels, office buildings, laundries, car washes, and small businesses; boilers for hospitals, schools, hotels, and other large commercial buildings, as well as homes, apartments, and condominiums; and water treatment products comprising point-of-entry water softeners, well water solutions, and whole-home water filtration products, and point-of-use carbon and reverse osmosis products for residences, restaurants, hotels, and offices. It also provides commercial water treatment and filtration product; expansion tanks, commercial solar water heating systems, swimming pool and spa heaters, and related products and parts; and electric wall-hung, gas tankless, combi-boiler, and heat pump and solar water heaters. The company offers its products under the A. O. Smith, State, Lochinvar, Hague, Water-Right, Master Water, Atlantic Filter, and Water Tec brands. It distributes its products through independent wholesale plumbing distributors, as well as to retail channels consisting of hardware and home center chains, and manufacturer representative firms; and offers Aquasana branded products directly to consumers through e-commerce channels. A. O. Smith Corporation was founded in 1874 and is headquartered in Milwaukee, Wisconsin.