Graco (NYSE:GGG) vs. Illinois Tool Works (NYSE:ITW) Financial Survey

Graco (NYSE:GGG) and Illinois Tool Works (NYSE:ITW) are both large-cap industrials companies, but which is the superior investment? We will compare the two businesses based on the strength of their dividends, valuation, earnings, analyst recommendations, institutional ownership, profitability and risk.

Analyst Recommendations

This is a breakdown of current ratings and price targets for Graco and Illinois Tool Works, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Graco	0	3	4	0	2.57
Illinois Tool Works	5	7	2	0	1.79

Graco currently has a consensus price target of $96.50, suggesting a potential upside of 9.79%. Illinois Tool Works has a consensus price target of $271.85, suggesting a potential upside of 1.64%. Given Graco’s stronger consensus rating and higher probable upside, research analysts clearly believe Graco is more favorable than Illinois Tool Works.

Dividends

Graco pays an annual dividend of $1.18 per share and has a dividend yield of 1.3%. Illinois Tool Works pays an annual dividend of $6.44 per share and has a dividend yield of 2.4%. Graco pays out 38.2% of its earnings in the form of a dividend. Illinois Tool Works pays out 61.4% 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. Graco has increased its dividend for 29 consecutive years and Illinois Tool Works has increased its dividend for 55 consecutive years. Illinois Tool Works is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

This table compares Graco and Illinois Tool Works’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Graco	23.33%	19.49%	15.89%
Illinois Tool Works	19.11%	95.16%	19.22%

Insider and Institutional Ownership

93.9% of Graco shares are held by institutional investors. Comparatively, 79.8% of Illinois Tool Works shares are held by institutional investors. 2.2% of Graco shares are held by insiders. Comparatively, 0.8% of Illinois Tool Works shares are held by 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.

Risk & Volatility

Graco has a beta of 1.09, indicating that its share price is 9% more volatile than the S&P 500. Comparatively, Illinois Tool Works has a beta of 1.13, indicating that its share price is 13% more volatile than the S&P 500.

Valuation and Earnings

This table compares Graco and Illinois Tool Works”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Graco	$2.24 billion	6.52	$521.84 million	$3.09	28.45
Illinois Tool Works	$16.04 billion	4.80	$3.07 billion	$10.49	25.50

Illinois Tool Works has higher revenue and earnings than Graco. Illinois Tool Works is trading at a lower price-to-earnings ratio than Graco, indicating that it is currently the more affordable of the two stocks.

Summary

Graco beats Illinois Tool Works on 9 of the 17 factors compared between the two stocks.

About Graco

Graco Inc. designs, manufactures, and markets systems and equipment used to move, measure, control, dispense, and spray fluid and powder materials worldwide. The Contractor segment offers sprayers to apply paint to walls and other structures; two-component proportioning systems that are used to spray polyurethane foam and polyurea coatings; and viscous coatings to roofs, as well as markings on roads, parking lots, athletic fields, and floors. The Industrial segment provides liquid finishing equipment, paint circulating and supply pumps, paint circulating advanced control systems, plural component coating proportioners, and accessories and spare parts; equipment that pumps, meters, mixes and dispenses sealant, adhesive, and composite materials; and gel-coat equipment, chop and wet-out systems, resin transfer molding systems and applicators, and precision dispensing solutions. It also offers powder finishing products to coat powder finishing on metals under the Gema and SAT brands. The Process segment provides pumps to move and dispense chemicals, water, wastewater, petroleum, food, lubricants, and other fluids; pressure valves used in the oil and natural gas industry, other industrial processes, and research facilities; and chemical injection pumping solutions for injection of chemicals into producing oil wells and pipelines. It also supplies pumps, hose reels, meters, valves, and accessories for fast oil change facilities, service garages, fleet service centers, automobile dealerships, auto parts stores, truck builders, and heavy equipment service centers; and systems, components, and accessories for the automatic lubrication of bearings, gears, and generators in industrial and commercial equipment, compressors, turbines, and on- and off-road vehicles. It sells its products through distributors, original equipment manufacturers, and home center channels, as well as to end-users. The company was incorporated in 1926 and is headquartered in Minneapolis, Minnesota.

About Illinois Tool Works

Illinois Tool Works Inc. manufactures and sells industrial products and equipment in the United States and internationally. It operates through seven segments: Automotive OEM; Food Equipment; Test & Measurement and Electronics; Welding; Polymers & Fluids; Construction Products; and Specialty Products. The Automotive OEM segment offers plastic and metal components, fasteners, and assemblies for automobiles, light trucks, and other industrial uses. The Food Equipment segment provides warewashing, refrigeration, cooking, and food processing equipment; kitchen exhaust, ventilation, and pollution control systems; and food equipment maintenance and repair services. The Test & Measurement and Electronics segment produces and sells equipment, consumables, and related software for testing and measuring of materials and structures, as well as equipment and consumables used in the production of electronic subassemblies and microelectronics. The Welding segment produces arc welding equipment; and metal arc welding consumables and related accessories. The Polymers & Fluids segment produces adhesives, sealants, lubrication and cutting fluids, and fluids and polymers for auto aftermarket maintenance and appearance. The Construction Products segment offers engineered fastening systems and solutions for the residential construction, renovation/remodel, and commercial construction markets. The Specialty Products segment provides beverage packaging equipment and consumables, product coding and marking equipment and consumables, and appliance components and fasteners. It serves the automotive OEM and tiers, MRO, commercial food equipment, construction, general industrial, industrial capital goods, consumer durables, automotive aftermarket end, and other markets. The company distributes its products directly to industrial manufacturers, as well as through independent distributors. Illinois Tool Works Inc. was founded in 1912 and is based in Glenview, Illinois.