Head-To-Head Review: W.W. Grainger (NYSE:GWW) and MSC Industrial Direct (NYSE:MSM)

W.W. Grainger (NYSE:GWW) and MSC Industrial Direct (NYSE:MSM) are both industrials companies, but which is the better stock? We will contrast the two businesses based on the strength of their earnings, profitability, risk, analyst recommendations, valuation, institutional ownership and dividends.

Analyst Ratings

This is a summary of current ratings for W.W. Grainger and MSC Industrial Direct, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
W.W. Grainger	2	6	1	0	1.89
MSC Industrial Direct	0	6	1	0	2.14

W.W. Grainger presently has a consensus price target of $1,009.43, indicating a potential downside of 2.07%. MSC Industrial Direct has a consensus price target of $91.50, indicating a potential upside of 5.14%. Given MSC Industrial Direct’s stronger consensus rating and higher possible upside, analysts clearly believe MSC Industrial Direct is more favorable than W.W. Grainger.

Dividends

W.W. Grainger pays an annual dividend of $9.04 per share and has a dividend yield of 0.9%. MSC Industrial Direct pays an annual dividend of $3.48 per share and has a dividend yield of 4.0%. W.W. Grainger pays out 25.4% of its earnings in the form of a dividend. MSC Industrial Direct pays out 97.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. W.W. Grainger has increased its dividend for 55 consecutive years and MSC Industrial Direct has increased its dividend for 3 consecutive years.

Institutional & Insider Ownership

80.7% of W.W. Grainger shares are held by institutional investors. Comparatively, 79.3% of MSC Industrial Direct shares are held by institutional investors. 6.1% of W.W. Grainger shares are held by company insiders. Comparatively, 19.0% of MSC Industrial Direct shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
W.W. Grainger	9.75%	49.40%	21.84%
MSC Industrial Direct	5.29%	15.21%	8.50%

Earnings & Valuation

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

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
W.W. Grainger	$17.17 billion	2.85	$1.91 billion	$35.66	28.90
MSC Industrial Direct	$3.77 billion	1.29	$199.33 million	$3.56	24.45

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

Volatility and Risk

W.W. Grainger has a beta of 1.11, meaning that its share price is 11% more volatile than the S&P 500. Comparatively, MSC Industrial Direct has a beta of 0.84, meaning that its share price is 16% less volatile than the S&P 500.

Summary

W.W. Grainger beats MSC Industrial Direct on 12 of the 16 factors compared between the two stocks.

About W.W. Grainger

W.W. Grainger, Inc., together with its subsidiaries, distributes maintenance, repair, and operating products and services primarily in North America, Japan, the United Kingdom, and internationally. The company operates through two segments, High-Touch Solutions N.A. and Endless Assortment. The company provides safety, security, material handling and storage equipment, pumps and plumbing equipment, cleaning and maintenance, and metalworking and hand tools. It also offers technical support and inventory management services. The company serves smaller businesses to large corporations, government entities, and other institutions, as well as commercial, healthcare, and manufacturing industries through sales and service representatives, and electronic and ecommerce channels. W.W. Grainger, Inc. was founded in 1927 and is headquartered in Lake Forest, Illinois.

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.