Critical Analysis: Parker-Hannifin (NYSE:PH) versus IHI (OTCMKTS:IHICY)

IHI (OTCMKTS:IHICY) and Parker-Hannifin (NYSE:PH) are both large-cap industrials companies, but which is the better business? We will compare the two businesses based on the strength of their analyst recommendations, dividends, valuation, risk, profitability, institutional ownership and earnings.

Earnings and Valuation

This table compares IHI and Parker-Hannifin”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
IHI	$10.68 billion	2.53	$744.08 million	$0.70	35.69
Parker-Hannifin	$19.85 billion	5.92	$3.53 billion	$27.42	33.97

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

Analyst Ratings

This is a summary of current ratings for IHI and Parker-Hannifin, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
IHI	0	2	0	0	2.00
Parker-Hannifin	0	5	16	0	2.76

Parker-Hannifin has a consensus price target of $995.37, suggesting a potential upside of 6.87%. Given Parker-Hannifin’s stronger consensus rating and higher possible upside, analysts clearly believe Parker-Hannifin is more favorable than IHI.

Dividends

IHI pays an annual dividend of $0.08 per share and has a dividend yield of 0.3%. Parker-Hannifin pays an annual dividend of $7.20 per share and has a dividend yield of 0.8%. IHI pays out 11.4% of its earnings in the form of a dividend. Parker-Hannifin pays out 26.3% 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. Parker-Hannifin has raised its dividend for 70 consecutive years. Parker-Hannifin is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Volatility & Risk

IHI has a beta of 0.65, indicating that its stock price is 35% less volatile than the S&P 500. Comparatively, Parker-Hannifin has a beta of 1.23, indicating that its stock price is 23% more volatile than the S&P 500.

Institutional & Insider Ownership

82.4% of Parker-Hannifin shares are owned by institutional investors. 0.3% of Parker-Hannifin shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company will outperform the market over the long term.

Profitability

This table compares IHI and Parker-Hannifin’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
IHI	6.50%	21.69%	4.70%
Parker-Hannifin	17.29%	27.56%	12.72%

Summary

Parker-Hannifin beats IHI on 15 of the 17 factors compared between the two stocks.

About IHI

IHI Corporation designs and builds engineering solutions in Japan and internationally. The company operates through four segments: Resources, Energy and Environment; Social Infrastructure; Industrial Systems and General-Purpose Machinery; and Aero Engine, Space and Defense. The company engages in the manufacturing, sale, and provision of services related to power systems plants for land use and power systems for chips; carbon solutions comprising boilers and storage facilities; components for nuclear power plants; bridges and water gates, transport systems, shield systems, and concrete construction materials; vehicular turbochargers, parking, heat treatment and surface engineering; transport machineries; logistics and industrial systems; and rotating machineries comprising compressors, separation systems, and turbochargers for ships. It also offers 3D laser radars, X-ray inspection systems, monitoring equipment, oil leak monitors, vibration control systems and seismic isolation floor systems, and disaster prevention equipment; environmental monitoring; cryogenic products, material handling systems, steelmaking equipment, pulp and paper machinery, agricultural machinery, life associated equipment; aero engines; rocket, space utilization, defense, and traffic control systems; and communication, electronic, electric measuring, information processing machines, and other instruments and equipment. In addition, the company sells and rents real estate. The company was formerly known as Ishikawajima-Harima Heavy Industries Co., Ltd and changed its name to IHI Corporation in 2007. IHI Corporation was founded in 1853 and is headquartered in Tokyo, Japan.

About Parker-Hannifin

Parker-Hannifin Corporation manufactures and sells motion and control technologies and systems for various mobile, industrial, and aerospace markets worldwide. The company operates through two segments: Diversified Industrial and Aerospace Systems. The Diversified Industrial segment offers sealing, shielding, thermal products and systems, adhesives, coatings, and noise vibration and harshness solutions; filters, systems, and diagnostics solutions to ensure purity and remove contaminants from fuel, air, oil, water, and other liquids and gases; connectors used in fluid and gas handling; and hydraulic, pneumatic, and electromechanical components and systems for builders and users of mobile and industrial machinery and equipment. This segment sells its products to original equipment manufacturers (OEMs) and distributors who serve the replacement markets in manufacturing, packaging, processing, transportation, construction, refrigeration and air conditioning, agricultural, and military machinery and equipment industries. The Aerospace Systems segment offers products for use in commercial and military airframe and engine programs, such as control actuation systems and components, engine build-up ducting, engine exhaust nozzles and assemblies, engine systems and components, fluid conveyance systems and components, fuel systems and components, fuel tank inerting systems, hydraulic systems and components, lubrication components, avionics, sensors, pneumatic control components, thermal management products, fire detection and suppression systems and components, and wheels and brakes, as well as fluid metering, delivery, and atomization devices. This segment markets its products directly to OEMs and end users. The company markets its products through direct-sales employees, independent distributors, and sales representatives. Parker-Hannifin Corporation was founded in 1917 and is headquartered in Cleveland, Ohio.