Comparing Gates Industrial (NYSE:GTES) and Ferguson (NYSE:FERG)

Gates Industrial (NYSE:GTES) and Ferguson (NYSE:FERG) are both industrials companies, but which is the better investment? We will contrast the two companies based on the strength of their dividends, institutional ownership, analyst recommendations, valuation, profitability, earnings and risk.

Risk and Volatility

Gates Industrial has a beta of 1.25, suggesting that its stock price is 25% more volatile than the S&P 500. Comparatively, Ferguson has a beta of 1.17, suggesting that its stock price is 17% more volatile than the S&P 500.

Institutional and Insider Ownership

98.5% of Gates Industrial shares are held by institutional investors. Comparatively, 82.0% of Ferguson shares are held by institutional investors. 2.7% of Gates Industrial shares are held by company insiders. Comparatively, 0.2% of Ferguson 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.

Analyst Ratings

This is a summary of current ratings and price targets for Gates Industrial and Ferguson, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Gates Industrial	0	4	7	1	2.75
Ferguson	0	2	1	1	2.75

Gates Industrial currently has a consensus target price of $28.18, suggesting a potential upside of 9.43%. Given Gates Industrial’s higher probable upside, analysts clearly believe Gates Industrial is more favorable than Ferguson.

Valuation and Earnings

This table compares Gates Industrial and Ferguson”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Gates Industrial	$3.39 billion	1.96	$194.90 million	$0.78	33.02
Ferguson	$30.76 billion	1.47	$1.86 billion	$9.34	24.77

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

Profitability

This table compares Gates Industrial and Ferguson’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Gates Industrial	5.98%	10.17%	5.02%
Ferguson	6.03%	35.21%	11.59%

Summary

Gates Industrial beats Ferguson on 7 of the 13 factors compared between the two stocks.

About Gates Industrial

Gates Industrial Corporation PLC designs and manufactures power transmission equipment. Its products serves harsh and hazardous industries such as agriculture, construction, manufacturing and energy, to everyday consumer applications such as printers, power washers, automatic doors and vacuum cleaners and virtually every form of transportation.

About Ferguson

Ferguson Enterprises Inc. distributes plumbing and heating products in North America. The company provides expertise, solutions, and products, including infrastructure, plumbing, appliances, fire, and fabrication, as well as heating, ventilation, and air conditioning (HVAC) to residential and non-residential customers. It also supplies specialist water and wastewater treatment products to residential, commercial, and infrastructure contractors, as well as supplies pipe, valves, and fittings solutions to industrial customers. In addition, it offers customized solutions, such as virtual design, fabrication, valve actuation, pre-assembly, kitting, installation, and project management services, as well as after-sales support that comprises warranty, credit, project-based billing, returns and maintenance, and repair and operations support. The company sells its products through a network of distribution centers, branches, counter service and specialist sales associates, showroom consultants, and e-commerce channels. Ferguson Enterprises Inc. was founded in 1953 and is headquartered in Newport News, Virginia.