Analyzing Federal Signal (NYSE:FSS) and Sandvik (OTCMKTS:SDVKY)

Sandvik (OTCMKTS:SDVKY) and Federal Signal (NYSE:FSS) are both industrials companies, but which is the superior investment? We will compare the two companies based on the strength of their valuation, profitability, dividends, risk, analyst recommendations, earnings and institutional ownership.

Valuation and Earnings

This table compares Sandvik and Federal Signal”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Sandvik	$12.34 billion	3.84	$1.50 billion	$1.45	26.04
Federal Signal	$2.18 billion	3.19	$246.60 million	$4.64	24.58

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

Analyst Recommendations

This is a summary of recent recommendations and price targets for Sandvik and Federal Signal, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Sandvik	1	8	3	1	2.31
Federal Signal	0	2	3	1	2.83

Federal Signal has a consensus target price of $140.50, indicating a potential upside of 23.21%. Given Federal Signal’s stronger consensus rating and higher probable upside, analysts plainly believe Federal Signal is more favorable than Sandvik.

Volatility and Risk

Sandvik has a beta of 1.52, meaning that its stock price is 52% more volatile than the S&P 500. Comparatively, Federal Signal has a beta of 1.23, meaning that its stock price is 23% more volatile than the S&P 500.

Dividends

Sandvik pays an annual dividend of $0.41 per share and has a dividend yield of 1.1%. Federal Signal pays an annual dividend of $0.60 per share and has a dividend yield of 0.5%. Sandvik pays out 28.3% of its earnings in the form of a dividend. Federal Signal pays out 12.9% 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. Federal Signal has increased its dividend for 3 consecutive years.

Profitability

This table compares Sandvik and Federal Signal’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Sandvik	13.05%	18.45%	9.99%
Federal Signal	11.66%	21.36%	13.07%

Institutional and Insider Ownership

0.7% of Sandvik shares are held by institutional investors. Comparatively, 92.7% of Federal Signal shares are held by institutional investors. 3.3% of Federal Signal shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.

Summary

Federal Signal beats Sandvik on 9 of the 16 factors compared between the two stocks.

About Sandvik

Sandvik AB (publ), an engineering company, provides products and solutions for mining and rock excavation, metal cutting, and materials technology worldwide. The company offers mining and rock excavation equipment, including drill rigs and bolters, underground loaders and trucks, mechanical cutting equipment, rock tools and rock drills, and mining automation; rock processing equipment, such as crushers, screens, hydraulic breakers, demolition tools, and breaker booms. It also provides metal-cutting tools and tooling systems, and digital solutions and software; metal powder for additive manufacturing, and components made from controlled expansion alloys; and tungsten powders, as well as recycling services of secondary tungsten raw materials. The company serves aerospace, automotive, energy, general engineering, infrastructure, and mining industries. Sandvik AB (publ) was founded in 1862 and is headquartered in Stockholm, Sweden.

About Federal Signal

Federal Signal Corp. engages in the design and manufacture of products and integrated solutions for municipal, governmental, industrial, and commercial customers. It operates through the Environmental Solutions Group and Safety and Security Systems Group segments. The Environment Solutions Group segment is involved in the manufacture and supply of street sweeper vehicles, sewer cleaners, vacuum loader trucks, hydro-excavation trucks, and water blasting equipment. The Safety and Security Systems Group segment offers comprehensive systems and products that law enforcement, fire rescue, emergency medical services, campuses, military facilities, and industrial sites use to protect people and property. The company was founded in 1901 and is headquartered in Oak Brook, IL.