Financial Contrast: PACCAR (NASDAQ:PCAR) & Polaris (NYSE:PII)

PACCAR (NASDAQ:PCAR) and Polaris (NYSE:PII) are both auto/tires/trucks companies, but which is the better investment? We will contrast the two companies based on the strength of their earnings, risk, institutional ownership, dividends, profitability, valuation and analyst recommendations.

Profitability

This table compares PACCAR and Polaris’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
PACCAR	9.88%	18.25%	7.69%
Polaris	-1.57%	5.16%	1.19%

Dividends

PACCAR pays an annual dividend of $1.32 per share and has a dividend yield of 1.3%. Polaris pays an annual dividend of $2.68 per share and has a dividend yield of 4.5%. PACCAR pays out 22.6% of its earnings in the form of a dividend. Polaris pays out -142.6% 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. PACCAR has raised its dividend for 5 consecutive years and Polaris has raised its dividend for 30 consecutive years. Polaris is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Recommendations

This is a breakdown of recent ratings and recommmendations for PACCAR and Polaris, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
PACCAR	0	8	4	2	2.57
Polaris	1	12	1	0	2.00

PACCAR currently has a consensus price target of $107.68, indicating a potential upside of 5.82%. Polaris has a consensus price target of $49.17, indicating a potential downside of 18.10%. Given PACCAR’s stronger consensus rating and higher probable upside, equities research analysts clearly believe PACCAR is more favorable than Polaris.

Valuation and Earnings

This table compares PACCAR and Polaris”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
PACCAR	$33.66 billion	1.59	$4.16 billion	$5.84	17.42
Polaris	$7.18 billion	0.47	$110.80 million	($1.88)	-31.93

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

Institutional and Insider Ownership

64.9% of PACCAR shares are held by institutional investors. Comparatively, 88.1% of Polaris shares are held by institutional investors. 2.0% of PACCAR shares are held by insiders. Comparatively, 3.1% of Polaris shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock is poised for long-term growth.

Risk and Volatility

PACCAR has a beta of 0.94, indicating that its stock price is 6% less volatile than the S&P 500. Comparatively, Polaris has a beta of 1.08, indicating that its stock price is 8% more volatile than the S&P 500.

Summary

PACCAR beats Polaris on 12 of the 18 factors compared between the two stocks.

About PACCAR

PACCAR Inc designs, manufactures, and distributes light, medium, and heavy-duty commercial trucks in the United States, Canada, Europe, Mexico, South America, Australia, and internationally. It operates through three segments: Truck, Parts, and Financial Services. The Truck segment designs, manufactures, and distributes trucks for the over-the-road and off-highway hauling of commercial and consumer goods. It sells its trucks through a network of independent dealers under the Kenworth, Peterbilt, and DAF nameplates. The Parts segment distributes aftermarket parts for trucks and related commercial vehicles. The Financial Services segment conducts full-service leasing operations under the PacLease trade name, as well as provides finance and leasing products and services to customers and dealers. This segment also offers equipment financing and administrative support services for its franchisees; retail loan and leasing services for small, medium, and large commercial trucking companies, as well as independent owners/operators and other businesses; and truck inventory financing services to independent dealers. In addition, this segment offers loans and leases directly to customers for the acquisition of trucks and related equipment. The company also manufactures and markets industrial winches under the Braden, Carco, and Gearmatic nameplates. PACCAR Inc was founded in 1905 and is headquartered in Bellevue, Washington.

About Polaris

Polaris Inc. designs, engineers, manufactures, and markets powersports vehicles in the United States, Canada, and internationally. It operates through three segments: Off-Road, On-Road, and Marine. The company offers off-road vehicles (ORVs), including all-terrain vehicles and side-by-side vehicles; military and commercial ORVs; snowmobiles; motorcycles; and moto-roadsters, quadricycles, and boats. It also provides ORV accessories comprising winches, bumper/brushguards, plows, racks, wheels and tires, pull-behinds, cab systems, lighting and audio systems, cargo box accessories, tracks, and oil; snowmobile accessories, which include covers, traction products, reverse kits, electric starters, tracks, bags, windshields, oil, and lubricants; and motorcycle accessories, such as saddle bags, handlebars, backrests, exhausts, windshields, seats, oil, and various chrome accessories. In addition, the company offers light duty hauling and passenger vehicles; gear and apparel, such as helmets, goggles, jackets, gloves, boots, bibs, hats, pants, and leathers; and pontoon and deck boats. The company provides its products through dealers and distributors, and online; and retail and e-commerce marketplaces. The company was formerly known as Polaris Industries Inc. Polaris Inc. was founded in 1945 and is headquartered in Medina, Minnesota.