MSC Industrial Direct (NYSE:MSM) and ScanSource (NASDAQ:SCSC) Critical Comparison

MSC Industrial Direct (NYSE:MSM) and ScanSource (NASDAQ:SCSC) are both industrials companies, but which is the superior business? We will compare the two businesses based on the strength of their institutional ownership, dividends, valuation, analyst recommendations, profitability, earnings and risk.

Insider and Institutional Ownership

79.3% of MSC Industrial Direct shares are held by institutional investors. Comparatively, 97.9% of ScanSource shares are held by institutional investors. 18.3% of MSC Industrial Direct shares are held by company insiders. Comparatively, 4.2% of ScanSource shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company will outperform the market over the long term.

Analyst Ratings

This is a breakdown of current ratings for MSC Industrial Direct and ScanSource, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
MSC Industrial Direct	0	3	1	1	2.60
ScanSource	0	0	1	1	3.50

MSC Industrial Direct presently has a consensus price target of $90.33, indicating a potential upside of 0.23%. ScanSource has a consensus price target of $42.00, indicating a potential downside of 3.78%. Given MSC Industrial Direct’s higher possible upside, equities research analysts clearly believe MSC Industrial Direct is more favorable than ScanSource.

Earnings & Valuation

This table compares MSC Industrial Direct and ScanSource”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
MSC Industrial Direct	$3.82 billion	1.31	$258.59 million	$3.54	25.46
ScanSource	$3.04 billion	0.31	$71.55 million	$3.01	14.50

MSC Industrial Direct has higher revenue and earnings than ScanSource. ScanSource is trading at a lower price-to-earnings ratio than MSC Industrial Direct, indicating that it is currently the more affordable of the two stocks.

Risk and Volatility

MSC Industrial Direct has a beta of 0.95, meaning that its share price is 5% less volatile than the S&P 500. Comparatively, ScanSource has a beta of 1.43, meaning that its share price is 43% more volatile than the S&P 500.

Profitability

This table compares MSC Industrial Direct and ScanSource’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
MSC Industrial Direct	5.30%	14.99%	8.39%
ScanSource	2.35%	9.38%	4.87%

Summary

MSC Industrial Direct beats ScanSource on 10 of the 13 factors compared between the two stocks.

About MSC Industrial Direct

MSC Industrial Direct Co., Inc., together with its subsidiaries, distributes metalworking and maintenance, repair, and operations (MRO) products and services in the United States, Canada, Mexico, the United Kingdom, and internationally. The company's MRO products include cutting tools, measuring instruments, tooling components, metalworking products, fasteners, flat stock products, raw materials, abrasives, machinery hand and power tools, safety and janitorial supplies, plumbing supplies, materials handling products, power transmission components, and electrical supplies. It offers stock-keeping units through its catalogs and brochures; e-commerce channels, including its website, mscdirect.com; inventory management solutions; and customer care centers, customer fulfillment centers, regional inventory centers, and warehouses. The company serves individual machine shops, manufacturing companies, and government agencies. MSC Industrial Direct Co., Inc. was founded in 1941 and is headquartered in Melville, New York.

About ScanSource

ScanSource, Inc. engages in the distribution of technology products and solutions in the United States, Canada, and Brazil. It operates through two segments, Specialty Technology Solutions and Modern Communications & Cloud. The Specialty Technology Solutions segment provides a portfolio of solutions primarily for enterprise mobile computing, data capture, barcode printing, point of sale (POS), payments, networking, electronic physical security, cyber security, and other technologies. This segment offers data capture and POS solutions to automate the collection, processing, and communication of information for commercial and industrial applications, including retail sales, distribution, shipping, inventory control, materials handling, warehouse management, and health care applications. It also provides electronic physical security products, such as identification, access control, video surveillance, and intrusion-related devices; networking products comprising wireless and networking infrastructure products; other software-as-a-service (SaaS) products; and engages in hardware rental activities. The Modern Communications & Cloud segment offers a portfolio of solutions primarily for communications technologies and services comprising voice, video conferencing, wireless, data networking, cybersecurity, cable, unified communications and collaboration, cloud, and technology services, as well as IP networks and other solutions for various vertical markets, such as education, healthcare, and government. The company serves manufacturing, warehouse and distribution, retail and e-commerce, hospitality, transportation and logistics, government, education and healthcare, and other industries. ScanSource, Inc. was incorporated in 1992 and is headquartered in Greenville, South Carolina.