Critical Analysis: AAON (NASDAQ:AAON) & Armstrong World Industries (NYSE:AWI)

Armstrong World Industries (NYSE:AWI) and AAON (NASDAQ:AAON) are both mid-cap industrials companies, but which is the superior business? We will contrast the two companies based on the strength of their profitability, dividends, analyst recommendations, earnings, risk, valuation and institutional ownership.

Volatility & Risk

Armstrong World Industries has a beta of 1.14, indicating that its stock price is 14% more volatile than the S&P 500. Comparatively, AAON has a beta of 1.45, indicating that its stock price is 45% more volatile than the S&P 500.

Earnings and Valuation

This table compares Armstrong World Industries and AAON”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Armstrong World Industries	$1.62 billion	4.50	$308.70 million	$7.49	23.29
AAON	$1.44 billion	4.51	$107.59 million	$2.38	33.11

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

Insider and Institutional Ownership

98.9% of Armstrong World Industries shares are held by institutional investors. Comparatively, 70.8% of AAON shares are held by institutional investors. 1.2% of Armstrong World Industries shares are held by insiders. Comparatively, 18.1% of AAON shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Profitability

This table compares Armstrong World Industries and AAON’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Armstrong World Industries	18.38%	38.06%	17.16%
AAON	8.75%	20.23%	10.88%

Dividends

Armstrong World Industries pays an annual dividend of $1.49 per share and has a dividend yield of 0.9%. AAON pays an annual dividend of $0.40 per share and has a dividend yield of 0.5%. Armstrong World Industries pays out 19.9% of its earnings in the form of a dividend. AAON pays out 16.8% 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. Armstrong World Industries has raised its dividend for 1 consecutive years and AAON has raised its dividend for 2 consecutive years.

Analyst Recommendations

This is a summary of recent recommendations for Armstrong World Industries and AAON, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Armstrong World Industries	0	2	7	0	2.78
AAON	0	3	4	0	2.57

Armstrong World Industries currently has a consensus price target of $203.12, suggesting a potential upside of 16.44%. AAON has a consensus price target of $106.33, suggesting a potential upside of 34.94%. Given AAON’s higher probable upside, analysts plainly believe AAON is more favorable than Armstrong World Industries.

Summary

Armstrong World Industries beats AAON on 10 of the 17 factors compared between the two stocks.

About Armstrong World Industries

Armstrong World Industries, Inc. develops and manufactures ceiling and wall systems for commercial and residential buildings. Its products include acoustical ceiling panels and suspension systems, metal and wood ceilings, wall panels, and architectural specialty products designed for construction, renovation, and interior design projects. The company serves customers primarily in North America, including building owners, contractors, architects, and distributors. Its products are used in settings such as offices, schools, healthcare facilities, and homes.

About AAON

AAON, Inc. designs and manufactures heating, ventilation and air-conditioning (HVAC) equipment for commercial and industrial buildings. Founded in 1988, the company is headquartered in Tulsa, Oklahoma, and sells products under the AAON and BASX brands. Its products include rooftop units, chillers, air-handling units, heat pumps and other custom HVAC systems. BASX specializes in equipment for data centers and other demanding applications, while AAON also offers controls and related services. AAON serves customers primarily in North America, with products also reaching international markets through its sales and distribution network.