Contrasting Xylem (NYSE:XYL) & IHI (OTCMKTS:IHICY)

Xylem (NYSE:XYL) and IHI (OTCMKTS:IHICY) are both large-cap industrials companies, but which is the better investment? We will contrast the two companies based on the strength of their profitability, dividends, institutional ownership, earnings, risk, analyst recommendations and valuation.

Analyst Recommendations

This is a summary of current ratings and target prices for Xylem and IHI, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Xylem	2	8	9	0	2.37
IHI	0	1	0	0	2.00

Xylem currently has a consensus target price of $121.31, suggesting a potential upside of 22.30%. Given Xylem’s stronger consensus rating and higher probable upside, equities analysts clearly believe Xylem is more favorable than IHI.

Institutional and Insider Ownership

88.0% of Xylem shares are held by institutional investors. 0.3% of Xylem shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Volatility and Risk

Xylem has a beta of 1.01, meaning that its stock price is 1% more volatile than the S&P 500. Comparatively, IHI has a beta of 0.75, meaning that its stock price is 25% less volatile than the S&P 500.

Earnings & Valuation

This table compares Xylem and IHI”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Xylem	$9.04 billion	2.52	$957.00 million	$4.52	21.94
IHI	$10.92 billion	1.54	$1.06 billion	$1.15	13.52

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

Dividends

Xylem pays an annual dividend of $1.72 per share and has a dividend yield of 1.7%. IHI pays an annual dividend of $0.07 per share and has a dividend yield of 0.5%. Xylem pays out 38.1% of its earnings in the form of a dividend. IHI pays out 6.1% 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. Xylem has increased its dividend for 2 consecutive years. Xylem is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

This table compares Xylem and IHI’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Xylem	11.94%	12.06%	7.51%
IHI	N/A	N/A	N/A

Summary

Xylem beats IHI on 13 of the 16 factors compared between the two stocks.

About Xylem

Xylem Inc., together with its subsidiaries, engages in the design, manufacture, and servicing of engineered products and solutions worldwide. It operates through four segments: Water Infrastructure, Applied Water, Measurement & Control Solutions, and Integrated Solutions and Services. The Water Infrastructure segment offers products, including water, storm water, and wastewater pumps; controls and systems; filtration, disinfection, and biological treatment equipment; and mobile dewatering equipment and rental services under the ADI, Flygt, Godwin, Sanitaire, Magneto, Neptune Benson, Ionpure, Leopold, Wedeco, and Xylem Vue brands. The Applied Water segment provides pumps, valves, heat exchangers, controls, and dispensing equipment systems under the Goulds Water Technology, Bell & Gossett, A-C Fire Pump, Standard Xchange, Lowara, Jabsco, Xylem Vue, and Flojet brands. The Measurement & Control Solutions segment offers smart meters, networked communication devices, data analytics, test equipment, controls, sensor devices, software and managed services, and critical infrastructure services; and software and services, including cloud-based analytics, remote monitoring and data management, leak detection, condition assessment, asset management, and pressure monitoring solutions, as well as testing equipment. This segment sells its products under the Pure Technologies, Sensus, Smith Blair, WTW, Xylem Vue, and YSI brands. The Integrated Solutions and Services segment provides maintenance services, mobile services, digital outsourced solutions, wastewater systems, environmental remediation, odor and corrosion control, filtration, reverse osmosis, ion exchange, and deionization under Aquapro, WaterOne, and Ion Pure brands. Xylem Inc. was formerly known as ITT WCO, Inc. and changed its name to Xylem Inc. in May 2011. Xylem Inc. was incorporated in 2011 and is headquartered in Washington, District of Columbia.

About IHI

IHI Corporation designs and builds engineering solutions in Japan and internationally. The company operates through four segments: Resources, Energy and Environment; Social Infrastructure; Industrial Systems and General-Purpose Machinery; and Aero Engine, Space and Defense. The company engages in the manufacturing, sale, and provision of services related to power systems plants for land use and power systems for chips; carbon solutions comprising boilers and storage facilities; components for nuclear power plants; bridges and water gates, transport systems, shield systems, and concrete construction materials; vehicular turbochargers, parking, heat treatment and surface engineering; transport machineries; logistics and industrial systems; and rotating machineries comprising compressors, separation systems, and turbochargers for ships. It also offers 3D laser radars, X-ray inspection systems, monitoring equipment, oil leak monitors, vibration control systems and seismic isolation floor systems, and disaster prevention equipment; environmental monitoring; cryogenic products, material handling systems, steelmaking equipment, pulp and paper machinery, agricultural machinery, life associated equipment; aero engines; rocket, space utilization, defense, and traffic control systems; and communication, electronic, electric measuring, information processing machines, and other instruments and equipment. In addition, the company sells and rents real estate. The company was formerly known as Ishikawajima-Harima Heavy Industries Co., Ltd and changed its name to IHI Corporation in 2007. IHI Corporation was founded in 1853 and is headquartered in Tokyo, Japan.