Contrasting Powell Industries (NASDAQ:POWL) and Emerson Electric (NYSE:EMR)

Powell Industries (NASDAQ:POWL) and Emerson Electric (NYSE:EMR) are both industrials companies, but which is the better investment? We will compare the two businesses based on the strength of their profitability, analyst recommendations, valuation, institutional ownership, risk, earnings and dividends.

Insider & Institutional Ownership

89.8% of Powell Industries shares are held by institutional investors. Comparatively, 74.3% of Emerson Electric shares are held by institutional investors. 2.2% of Powell Industries shares are held by company insiders. Comparatively, 0.5% of Emerson Electric shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Profitability

This table compares Powell Industries and Emerson Electric’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Powell Industries	16.22%	33.16%	18.23%
Emerson Electric	14.92%	14.34%	7.79%

Dividends

Powell Industries pays an annual dividend of $1.07 per share and has a dividend yield of 0.3%. Emerson Electric pays an annual dividend of $2.11 per share and has a dividend yield of 1.6%. Powell Industries pays out 7.4% of its earnings in the form of a dividend. Emerson Electric pays out 45.4% 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. Powell Industries has increased its dividend for 3 consecutive years and Emerson Electric has increased its dividend for 68 consecutive years. Emerson Electric is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Volatility and Risk

Powell Industries has a beta of 0.81, suggesting that its stock price is 19% less volatile than the S&P 500. Comparatively, Emerson Electric has a beta of 1.3, suggesting that its stock price is 30% more volatile than the S&P 500.

Analyst Recommendations

This is a summary of recent ratings and recommmendations for Powell Industries and Emerson Electric, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Powell Industries	0	0	2	1	3.33
Emerson Electric	1	6	11	2	2.70

Powell Industries presently has a consensus target price of $312.00, suggesting a potential downside of 14.60%. Emerson Electric has a consensus target price of $148.61, suggesting a potential upside of 14.96%. Given Emerson Electric’s higher probable upside, analysts clearly believe Emerson Electric is more favorable than Powell Industries.

Earnings and Valuation

This table compares Powell Industries and Emerson Electric”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Powell Industries	$1.08 billion	4.08	$149.85 million	$14.40	25.37
Emerson Electric	$17.78 billion	4.09	$1.97 billion	$4.65	27.80

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

Summary

Emerson Electric beats Powell Industries on 10 of the 18 factors compared between the two stocks.

About Powell Industries

Powell Industries, Inc., together with its subsidiaries, designs, develops, manufactures, sells, and services custom-engineered equipment and systems. The company’s principal products include integrated power control room substations, custom-engineered modules, electrical houses, medium-voltage circuit breakers, monitoring and control communications systems, motor control centers, switches, and bus duct systems, as well as traditional and arc-resistant distribution switchgears and control gears. Its products have application in voltages ranging from 480 volts to 38,000 volts. The company also provide field service inspection, installation, commissioning, modification and repair, spare parts, retrofit and retrofill components for existing systems, and replacement circuit breakers for switchgear. It serves onshore and offshore production, liquefied natural gas facilities and terminals, pipelines, refineries, and petrochemical plants, as well as electric utility, light rail traction power, mining and metals, pulp and paper, data centers and other municipal, commercial, and industrial markets. The company has operations in the United States, Canada, the Middle East, Africa, Europe, Mexico, and Central and South America. Powell Industries, Inc. was founded in 1947 and is headquartered in Houston, Texas.

About Emerson Electric

Emerson Electric Co., a technology and software company, provides various solutions for customers in industrial, commercial, and consumer markets in the Americas, Asia, the Middle East, Africa, and Europe. It operates in six segments: Final Control, Control Systems & Software, Measurement & Analytical, AspenTech, Discrete Automation, and Safety & Productivity. The Final Control segment provides control, isolation, shutoff, pressure relief, and pressure safety valves, actuators, and regulators for process and hybrid industries. The Measurement & Analytical segment offers intelligent instrumentation measuring the physical properties of liquids or gases, such as pressure, temperature, level, flow, acoustics, corrosion, pH, conductivity, water quality, toxic gases, and flame. The Discrete Automation segment offers solenoid and pneumatic valves, valve position indicators, pneumatic cylinders, air preparation equipment, pressure and temperature switches, electric linear motion solutions, programmable automation control systems, electrical distribution equipment, and materials joining solutions. The Safety & Productivity segment offers tools for professionals and homeowners; pipe-working tools, including pipe wrenches, pipe cutters, pipe threading and roll grooving equipment, battery hydraulic tools; electrical tools; and other professional tools. The Control Systems & Software segment provides distributed control systems, safety instrumented systems, SCADA systems, application software, digital twins, asset performance management, and cybersecurity. The Test & Measurement provides software-connected automated test and measurement systems. The AspenTech segment provides asset optimization software that enables industrial manufacturers to design, operate, and maintain operations for enhancing performance through a combination of decades of modeling, simulation, and optimization capabilities. The company was incorporated in 1890 and is headquartered in Saint Louis, Missouri.