Critical Survey: Kadant (NYSE:KAI) vs. Otis Worldwide (NYSE:OTIS)

Kadant (NYSE:KAI) and Otis Worldwide (NYSE:OTIS) are both industrials companies, but which is the better investment? We will contrast the two businesses based on the strength of their profitability, valuation, analyst recommendations, dividends, risk, institutional ownership and earnings.

Profitability

This table compares Kadant and Otis Worldwide’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Kadant	9.96%	11.97%	7.41%
Otis Worldwide	9.59%	-30.42%	14.84%

Dividends

Kadant pays an annual dividend of $1.36 per share and has a dividend yield of 0.4%. Otis Worldwide pays an annual dividend of $1.68 per share and has a dividend yield of 1.9%. Kadant pays out 15.7% of its earnings in the form of a dividend. Otis Worldwide pays out 48.0% 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. Kadant has increased its dividend for 12 consecutive years and Otis Worldwide has increased its dividend for 5 consecutive years.

Insider & Institutional Ownership

96.1% of Kadant shares are owned by institutional investors. Comparatively, 88.0% of Otis Worldwide shares are owned by institutional investors. 1.4% of Kadant shares are owned by company insiders. Comparatively, 0.2% of Otis Worldwide shares are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.

Analyst Ratings

This is a breakdown of current recommendations and price targets for Kadant and Otis Worldwide, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Kadant	0	2	1	0	2.33
Otis Worldwide	1	6	3	0	2.20

Kadant currently has a consensus target price of $337.50, indicating a potential upside of 1.13%. Otis Worldwide has a consensus target price of $101.44, indicating a potential upside of 13.16%. Given Otis Worldwide’s higher possible upside, analysts plainly believe Otis Worldwide is more favorable than Kadant.

Volatility & Risk

Kadant has a beta of 1.25, meaning that its stock price is 25% more volatile than the S&P 500. Comparatively, Otis Worldwide has a beta of 1.01, meaning that its stock price is 1% more volatile than the S&P 500.

Earnings and Valuation

This table compares Kadant and Otis Worldwide”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Kadant	$1.05 billion	3.73	$111.60 million	$8.65	38.58
Otis Worldwide	$14.43 billion	2.41	$1.38 billion	$3.50	25.61

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

Summary

Kadant beats Otis Worldwide on 11 of the 17 factors compared between the two stocks.

About Kadant

Kadant Inc. supplies technologies and engineered systems worldwide. It operates in three segments: Flow Control, Industrial Processing, and Material Handling. The Flow Control segment develops, manufactures, and markets fluid-handling systems and equipment, such as rotary joints, syphons, turbulator bars, expansion joints, and engineered steam and condensate systems; and doctoring, cleaning, and filtration systems and related consumables consisting of doctor systems and holders, doctor blades, cleaning shower and fabric-conditioning systems, forming systems and wear surfaces, and water-filtration systems. The Industrial Processing segment develops, manufactures, and markets ring and rotary debarkers, stranders, chippers, engineered knife systems, industrial automation and control, recycling and approach flow systems, and virgin pulping process equipment for use in the packaging, tissue, wood products, and alternative fuel industries. The Material Handling segment offers conveying and vibratory equipment, and baling products; and manufactures and sells biodegradable absorbent granules for carriers in agricultural, home lawn and garden, professional lawn, turf, and ornamental applications, as well as for oil and grease absorption. The company markets and sells its products, services, and systems through direct sales, independent sales agents, and distributors. The company was formerly known as Thermo Fibertek, Inc. and changed its name to Kadant Inc. in July 2001. Kadant Inc. was incorporated in 1991 and is headquartered in Westford, Massachusetts.

About Otis Worldwide

Otis Worldwide Corporation engages in manufacturing, installation, and servicing of elevators and escalators in the United States, China, and internationally. The company operates in two segments, New Equipment and Service. The New Equipment segment designs, manufactures, sells, and installs a range of passenger and freight elevators, as well as escalators and moving walkways for residential and commercial buildings, and infrastructure projects. This segment serves real-estate and building developers, and general contractors. It sells its products directly to customers, as well as through agents and distributors. The Service segment performs maintenance and repair services, as well as modernization services to upgrade elevators and escalators. Otis Worldwide Corporation was founded in 1853 and is headquartered in Farmington, Connecticut.