Analyzing Snap-On (NYSE:SNA) and Kadant (NYSE:KAI)

Snap-On (NYSE:SNA) and Kadant (NYSE:KAI) are both industrials companies, but which is the superior business? We will contrast the two companies based on the strength of their earnings, dividends, analyst recommendations, profitability, risk, institutional ownership and valuation.

Insider & Institutional Ownership

84.9% of Snap-On shares are owned by institutional investors. Comparatively, 96.1% of Kadant shares are owned by institutional investors. 3.8% of Snap-On shares are owned by insiders. Comparatively, 1.3% of Kadant shares are owned by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock will outperform the market over the long term.

Profitability

This table compares Snap-On and Kadant’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Snap-On	21.25%	17.07%	12.00%
Kadant	9.52%	13.16%	7.67%

Dividends

Snap-On pays an annual dividend of $9.76 per share and has a dividend yield of 2.5%. Kadant pays an annual dividend of $1.44 per share and has a dividend yield of 0.5%. Snap-On pays out 49.8% of its earnings in the form of a dividend. Kadant pays out 15.5% 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. Snap-On has raised its dividend for 15 consecutive years and Kadant has raised its dividend for 12 consecutive years. Snap-On is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Valuation & Earnings

This table compares Snap-On and Kadant”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Snap-On	$4.74 billion	4.19	$1.02 billion	$19.61	19.58
Kadant	$1.05 billion	3.35	$101.97 million	$9.30	32.07

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

Analyst Recommendations

This is a breakdown of current ratings and recommmendations for Snap-On and Kadant, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Snap-On	0	1	5	0	2.83
Kadant	0	3	1	0	2.25

Snap-On currently has a consensus target price of $426.20, indicating a potential upside of 11.00%. Kadant has a consensus target price of $357.50, indicating a potential upside of 19.87%. Given Kadant’s higher probable upside, analysts plainly believe Kadant is more favorable than Snap-On.

Risk and Volatility

Snap-On has a beta of 0.72, meaning that its stock price is 28% less volatile than the S&P 500. Comparatively, Kadant has a beta of 1.17, meaning that its stock price is 17% more volatile than the S&P 500.

Summary

Snap-On beats Kadant on 12 of the 17 factors compared between the two stocks.

About Snap-On

Snap-on Incorporated manufactures and markets tools, equipment, diagnostics, and repair information and systems solutions for professional users worldwide. It operates through Commercial & Industrial Group, Snap-on Tools Group, Repair Systems & Information Group, and Financial Services segments. The company provides hand tools, including wrenches, sockets, ratchet wrenches, pliers, screwdrivers, punches and chisels, saws and cutting tools, pruning tools, torque measuring instruments, and other related products; power tools, such as cordless, pneumatic, and hydraulic and corded tools; and tool storage products comprising tool chests, roll cabinets, and other products. It provides handheld and computer-based diagnostic products, service and repair information products, diagnostic software solutions, electronic parts catalogs, business management systems and services, point-of-sale systems, integrated systems for vehicle service shops, original equipment manufacturer purchasing facilitation services, and warranty management systems and analytics; and engineered solutions. In addition, the company offers solutions for the service of vehicles and industrial equipment that include wheel alignment equipment, wheel balancers, tire changers, vehicle lifts, test lane equipment, collision repair equipment, vehicle air conditioning service equipment, brake service equipment, fluid exchange equipment, transmission troubleshooting equipment, safety testing equipment, battery chargers, and hoists, as well as after-sales support services and training programs. Further, it provides financing programs to facilitate the sales of its products and support its franchise business. It serves the aviation and aerospace, agriculture, infrastructure construction, government and military, mining, natural resources, power generation, and technical education industries. Snap-on Incorporated was incorporated in 1920 and is headquartered in Kenosha, Wisconsin.

About Kadant

Kadant Inc. supplies technologies and engineered systems worldwide. It operates in three segments: Flow Control, Industrial Processing, and Material Handling. The Flow Control segment develops, manufactures, and markets fluid-handling systems and equipment, such as rotary joints, syphons, turbulator bars, expansion joints, and engineered steam and condensate systems; and doctoring, cleaning, and filtration systems and related consumables consisting of doctor systems and holders, doctor blades, cleaning shower and fabric-conditioning systems, forming systems and wear surfaces, and water-filtration systems. The Industrial Processing segment develops, manufactures, and markets ring and rotary debarkers, stranders, chippers, engineered knife systems, industrial automation and control, recycling and approach flow systems, and virgin pulping process equipment for use in the packaging, tissue, wood products, and alternative fuel industries. The Material Handling segment offers conveying and vibratory equipment, and baling products; and manufactures and sells biodegradable absorbent granules for carriers in agricultural, home lawn and garden, professional lawn, turf, and ornamental applications, as well as for oil and grease absorption. The company markets and sells its products, services, and systems through direct sales, independent sales agents, and distributors. The company was formerly known as Thermo Fibertek, Inc. and changed its name to Kadant Inc. in July 2001. Kadant Inc. was incorporated in 1991 and is headquartered in Westford, Massachusetts.