Illinois Tool Works (NYSE:ITW) and Lincoln Electric (NASDAQ:LECO) are both industrial products companies, but which is the superior business? We will contrast the two companies based on the strength of their valuation, earnings, profitability, analyst recommendations, risk, institutional ownership and dividends.
Valuation and Earnings
This table compares Illinois Tool Works and Lincoln Electric's gross revenue, earnings per share (EPS) and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio |
|---|
| Illinois Tool Works | $14.11 billion | 4.98 | $2.52 billion | $7.75 | 28.66 |
| Lincoln Electric | $3.00 billion | 2.44 | $293.11 million | $4.70 | 26.09 |
Illinois Tool Works has higher revenue and earnings than Lincoln Electric. Lincoln Electric is trading at a lower price-to-earnings ratio than Illinois Tool Works, indicating that it is currently the more affordable of the two stocks.
Analyst Recommendations
This is a breakdown of recent ratings and price targets for Illinois Tool Works and Lincoln Electric, as provided by MarketBeat.com.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score |
|---|
| Illinois Tool Works | 1 | 11 | 4 | 0 | 2.19 |
| Lincoln Electric | 1 | 3 | 4 | 0 | 2.38 |
Illinois Tool Works currently has a consensus price target of $210.1250, suggesting a potential downside of 5.24%. Lincoln Electric has a consensus price target of $115.80, suggesting a potential downside of 5.92%. Given Illinois Tool Works' higher probable upside, equities analysts plainly believe Illinois Tool Works is more favorable than Lincoln Electric.
Profitability
This table compares Illinois Tool Works and Lincoln Electric's net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets |
|---|
| Illinois Tool Works | 16.77% | 80.95% | 14.37% |
| Lincoln Electric | 7.59% | 34.42% | 10.82% |
Institutional & Insider Ownership
77.4% of Illinois Tool Works shares are held by institutional investors. Comparatively, 74.0% of Lincoln Electric shares are held by institutional investors. 0.8% of Illinois Tool Works shares are held by company insiders. Comparatively, 3.6% of Lincoln Electric shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.
Dividends
Illinois Tool Works pays an annual dividend of $4.56 per share and has a dividend yield of 2.1%. Lincoln Electric pays an annual dividend of $2.04 per share and has a dividend yield of 1.7%. Illinois Tool Works pays out 58.8% of its earnings in the form of a dividend. Lincoln Electric pays out 43.4% 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. Illinois Tool Works has raised its dividend for 50 consecutive years and Lincoln Electric has raised its dividend for 1 consecutive years. Illinois Tool Works is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.
Risk & Volatility
Illinois Tool Works has a beta of 1.07, meaning that its share price is 7% more volatile than the S&P 500. Comparatively, Lincoln Electric has a beta of 1.13, meaning that its share price is 13% more volatile than the S&P 500.
Summary
Illinois Tool Works beats Lincoln Electric on 11 of the 16 factors compared between the two stocks.
