Critical Analysis: Wabash National (NYSE:WNC) vs. BorgWarner (NYSE:BWA)

BorgWarner (NYSE:BWA) and Wabash National (NYSE:WNC) are both auto/tires/trucks companies, but which is the superior stock? We will contrast the two businesses based on the strength of their valuation, risk, profitability, institutional ownership, dividends, earnings and analyst recommendations.

Insider and Institutional Ownership

95.7% of BorgWarner shares are owned by institutional investors. Comparatively, 97.0% of Wabash National shares are owned by institutional investors. 0.8% of BorgWarner shares are owned by insiders. Comparatively, 2.8% of Wabash National shares are owned by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.

Analyst Recommendations

This is a summary of current ratings for BorgWarner and Wabash National, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
BorgWarner	0	6	9	0	2.60
Wabash National	1	1	2	0	2.25

BorgWarner currently has a consensus target price of $74.57, indicating a potential upside of 15.77%. Wabash National has a consensus target price of $18.00, indicating a potential upside of 35.44%. Given Wabash National’s higher probable upside, analysts clearly believe Wabash National is more favorable than BorgWarner.

Dividends

BorgWarner pays an annual dividend of $0.68 per share and has a dividend yield of 1.1%. Wabash National pays an annual dividend of $0.32 per share and has a dividend yield of 2.4%. BorgWarner pays out 40.2% of its earnings in the form of a dividend. Wabash National pays out -20.0% 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. BorgWarner has raised its dividend for 1 consecutive years. Wabash National is clearly the better dividend stock, given its higher yield and lower payout ratio.

Profitability

This table compares BorgWarner and Wabash National’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
BorgWarner	2.53%	18.36%	7.65%
Wabash National	-4.41%	-30.16%	-8.79%

Earnings and Valuation

This table compares BorgWarner and Wabash National”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
BorgWarner	$14.32 billion	0.92	$277.00 million	$1.69	38.11
Wabash National	$1.54 billion	0.35	$211.45 million	($1.60)	-8.31

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

Volatility & Risk

BorgWarner has a beta of 1.09, meaning that its stock price is 9% more volatile than the S&P 500. Comparatively, Wabash National has a beta of 1.43, meaning that its stock price is 43% more volatile than the S&P 500.

Summary

BorgWarner beats Wabash National on 11 of the 17 factors compared between the two stocks.

About BorgWarner

BorgWarner Inc., together with its subsidiaries, provides solutions for combustion, hybrid, and electric vehicles worldwide. It offers turbochargers, eBoosters, eTurbos, timing systems, emissions systems, thermal systems, gasoline ignition technology, smart remote actuators, powertrain sensors, cabin heaters, battery modules and systems, battery heaters, and battery charging. The company provides power electronics, control modules, software, friction, and mechanical products for automatic transmissions and torque-management products. It sells its products to original equipment manufacturers of light vehicles, which comprise passenger cars, sport-utility vehicles, vans, and light trucks; commercial vehicles, including medium-duty and heavy-duty trucks, and buses; and off-highway vehicles, such as agricultural and construction machinery, and marine applications, as well as to tier one vehicle systems suppliers and the aftermarket for light, commercial, and off-highway vehicles. The company was formerly known as Borg-Warner Automotive, Inc. BorgWarner Inc. was incorporated in 1987 and is headquartered in Auburn Hills, Michigan.

About Wabash National

Wabash National Corporation provides connected solutions for the transportation, logistics, and distribution industries primarily in the United States. The company operates through two segments, Transportation Solutions and Parts & Services. The Transportation Solutions segment designs and manufactures transportation-related equipment and products dry and refrigerated van trailers, platform trailers, tank trailers, and truck-mounted tanks; truck bodies for dry-freight transportation; cargo and cargo XL bodies for commercial applications; refrigerated truck bodies; platform truck bodies; and used trailers, as well as laminated hardwood oak flooring products. The Parts & Services segment provides aftermarket parts and services; steel flatbed bodies, truck body mounting, shelving for package delivery, partitions, roof racks, hitches, liftgates, thermal solutions, and others; truck body repair parts; and door repair and replacement, collision repair, and basic maintenance services. It also develops and scales a digital marketplace for the transportation and logistics distribution industry; operates a parts and services distribution platform; and stainless steel storage tanks and silos, mixers, and processors for the dairy, food and beverage, pharmaceutical, chemical, craft brewing, and biotech markets; trailers as a service; and composite products, including truck bodies, overhead doors, and other industrial application products, as well as used trailers. The company offers its products under the Wabash, DuraPlate, DuraPlateHD, DuraPlate AeroSkirt, and AeroSkirt CX brands, as well as EcoNex brand. It serves its products to truckload common carriers, leasing companies, private fleet carriers, less-than-truckload common carriers, and package carriers. Wabash National Corporation was founded in 1985 and is headquartered in Lafayette, Indiana.