A. O. Smith (NYSE:AOS) & Wartsila (OTCMKTS:WRTBY) Critical Contrast

Wartsila (OTCMKTS:WRTBY) and A. O. Smith (NYSE:AOS) are both industrials companies, but which is the better stock? We will compare the two companies based on the strength of their profitability, institutional ownership, valuation, earnings, dividends, analyst recommendations and risk.

Profitability

This table compares Wartsila and A. O. Smith’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Wartsila	8.89%	23.64%	7.61%
A. O. Smith	13.85%	29.34%	16.86%

Insider & Institutional Ownership

76.1% of A. O. Smith shares are held by institutional investors. 0.8% of A. O. Smith shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock will outperform the market over the long term.

Analyst Ratings

This is a summary of current recommendations and price targets for Wartsila and A. O. Smith, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Wartsila	2	3	0	0	1.60
A. O. Smith	0	6	2	0	2.25

A. O. Smith has a consensus price target of $76.71, suggesting a potential upside of 11.38%. Given A. O. Smith’s stronger consensus rating and higher probable upside, analysts clearly believe A. O. Smith is more favorable than Wartsila.

Volatility & Risk

Wartsila has a beta of 1.21, suggesting that its stock price is 21% more volatile than the S&P 500. Comparatively, A. O. Smith has a beta of 1.34, suggesting that its stock price is 34% more volatile than the S&P 500.

Dividends

Wartsila pays an annual dividend of $0.03 per share and has a dividend yield of 0.4%. A. O. Smith pays an annual dividend of $1.44 per share and has a dividend yield of 2.1%. Wartsila pays out 13.6% of its earnings in the form of a dividend. A. O. Smith pays out 38.8% 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. A. O. Smith has raised its dividend for 31 consecutive years. A. O. Smith is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Valuation and Earnings

This table compares Wartsila and A. O. Smith”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Wartsila	$6.98 billion	3.07	$544.30 million	$0.22	32.95
A. O. Smith	$3.82 billion	2.51	$533.60 million	$3.71	18.57

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

Summary

A. O. Smith beats Wartsila on 12 of the 17 factors compared between the two stocks.

About Wartsila

Wärtsilä Oyj Abp offers technologies and lifecycle solutions for the marine and energy markets worldwide. It offers engine power plant products, such as gas, multi-fuel, and diesel engines; GEMS Digital Energy Platform, a smart software platform that monitors, controls, and optimizes energy assets on site and portfolio levels; GridSolv Quantum, a fully integrated energy storage solution, which enables ease of deployment and sustainable energy optimization; GEMS Power Plant Controllers; GEMS Fleet Director, which provides centralized real-time visibility into a global fleet of power plants; and GEMS Grid Controller that conducts intelligent grid control and optimized power management for microgrids of various sizes. The company also provides GEMS smart energy management software platform to remotely monitor, operate, identify, and diagnose assets; lifecycle solutions for power plants; power and propulsion products, such as electric shipping and hybrid ships, engine and generating sets, propulsors and gears, and shaft line solutions; liquid and gas handling products, including ballast water management, freshwater generation, waste and wastewater treatment, gas solutions, and exhaust treatment equipment; port and fleet optimization; simulation and training solutions; and automation, navigation, and control systems. The company was founded in 1834 and is headquartered in Helsinki, Finland.

About A. O. Smith

A. O. Smith Corporation manufactures and markets residential and commercial gas and electric water heaters, boilers, heat pumps, tanks, and water treatment products in North America, China, Europe, and India. The company offers water heaters for residences, restaurants, hotels, office buildings, laundries, car washes, and small businesses; boilers for hospitals, schools, hotels, and other large commercial buildings, as well as homes, apartments, and condominiums; and water treatment products comprising point-of-entry water softeners, well water solutions, and whole-home water filtration products, and point-of-use carbon and reverse osmosis products for residences, restaurants, hotels, and offices. It also provides commercial water treatment and filtration product; expansion tanks, commercial solar water heating systems, swimming pool and spa heaters, and related products and parts; and electric wall-hung, gas tankless, combi-boiler, and heat pump and solar water heaters. The company offers its products under the A. O. Smith, State, Lochinvar, Hague, Water-Right, Master Water, Atlantic Filter, and Water Tec brands. It distributes its products through independent wholesale plumbing distributors, as well as to retail channels consisting of hardware and home center chains, and manufacturer representative firms; and offers Aquasana branded products directly to consumers through e-commerce channels. A. O. Smith Corporation was founded in 1874 and is headquartered in Milwaukee, Wisconsin.