Gorman-Rupp (NYSE: GRC) and Graco (NYSE:GGG) are both industrial products companies, but which is the better investment? We will contrast the two businesses based on the strength of their profitability, valuation, dividends, institutional ownership, risk, earnings and analyst recommendations.

Institutional & Insider Ownership

52.8% of Gorman-Rupp shares are owned by institutional investors. Comparatively, 86.3% of Graco shares are owned by institutional investors. 12.4% of Gorman-Rupp shares are owned by company insiders. Comparatively, 5.7% of Graco shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.

Valuation and Earnings

This table compares Gorman-Rupp and Graco’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Gorman-Rupp $382.07 million 2.14 $24.88 million $0.90 34.83
Graco $1.33 billion 5.44 $40.67 million $1.86 69.23

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

Dividends

Gorman-Rupp pays an annual dividend of $0.50 per share and has a dividend yield of 1.6%. Graco pays an annual dividend of $1.44 per share and has a dividend yield of 1.1%. Gorman-Rupp pays out 55.6% of its earnings in the form of a dividend. Graco pays out 77.4% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Gorman-Rupp has raised its dividend for 44 consecutive years and Graco has raised its dividend for 12 consecutive years. Gorman-Rupp is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Risk and Volatility

Gorman-Rupp has a beta of 1.3, indicating that its stock price is 30% more volatile than the S&P 500. Comparatively, Graco has a beta of 1.23, indicating that its stock price is 23% more volatile than the S&P 500.

Analyst Recommendations

This is a summary of current ratings for Gorman-Rupp and Graco, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Gorman-Rupp 0 0 0 0 N/A
Graco 0 9 0 0 2.00

Graco has a consensus target price of $115.29, indicating a potential downside of 10.47%. Given Graco’s higher possible upside, analysts plainly believe Graco is more favorable than Gorman-Rupp.

Profitability

This table compares Gorman-Rupp and Graco’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Gorman-Rupp 6.25% 9.72% 7.75%
Graco 7.72% 42.05% 19.92%

Summary

Graco beats Gorman-Rupp on 10 of the 15 factors compared between the two stocks.

Gorman-Rupp Company Profile

The Gorman-Rupp Company designs, manufactures and sells pumps and pump systems. The Company offers its products for use in dewatering; petroleum original equipment; agriculture; fire protection; heating, ventilating and air conditioning; military, and other liquid-handling applications. The Company operates in the manufacture and international sale of pumps and pump systems segment. The Company produces various types of pumps, which include self-priming centrifugal, standard centrifugal, magnetic drive centrifugal, axial and mixed flow, vertical turbine line shaft, submersible, high pressure booster, rotary gear, diaphragm, bellows and oscillating. Its larger pumps are sold for use in the construction, industrial, water and wastewater handling fields; for flood control; for improving low residential water pressure, and for pumping refined petroleum products, including the ground refueling of aircraft, and for various agricultural purposes.

Graco Company Profile

Graco Inc. designs, manufactures and markets systems and equipment used to move, measure, control, dispense and spray fluid and powder materials. The Company specializes in equipment for applications that involve materials with viscosities, materials with abrasive or corrosive properties, and multiple-component materials that require ratio control. The Company operates through three segments: Industrial, Process and Contractor. The Industrial segment markets equipment and pre-engineered packages for moving and applying paints, coatings, sealants, adhesives and other fluids. The Process segment markets pumps, valves, meters and accessories to move and dispense chemicals, oil and natural gas, water, wastewater, petroleum, food, lubricants and other fluids. The Contractor segment markets sprayers for architectural coatings for painting, corrosion control, texture and line striping. Its equipment is used in the manufacturing, processing, construction and maintenance industries.

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