Comparing Gates Industrial (NYSE:GTES) and Kadant (NYSE:KAI)

Gates Industrial (NYSE:GTES) and Kadant (NYSE:KAI) are both mid-cap industrials companies, but which is the superior stock? We will compare the two companies based on the strength of their earnings, institutional ownership, risk, analyst recommendations, valuation, dividends and profitability.

Analyst Ratings

This is a summary of current ratings and price targets for Gates Industrial and Kadant, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Gates Industrial	0	5	7	0	2.58
Kadant	0	2	1	1	2.75

Gates Industrial presently has a consensus target price of $30.18, suggesting a potential upside of 15.68%. Kadant has a consensus target price of $341.50, suggesting a potential upside of 0.74%. Given Gates Industrial’s higher possible upside, equities research analysts clearly believe Gates Industrial is more favorable than Kadant.

Earnings and Valuation

This table compares Gates Industrial and Kadant”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Gates Industrial	$3.44 billion	1.92	$251.40 million	$0.96	27.18
Kadant	$1.05 billion	3.80	$101.97 million	$8.77	38.65

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

Profitability

This table compares Gates Industrial and Kadant’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Gates Industrial	7.23%	10.00%	5.15%
Kadant	9.45%	12.13%	7.33%

Risk and Volatility

Gates Industrial has a beta of 1.28, meaning that its share price is 28% more volatile than the S&P 500. Comparatively, Kadant has a beta of 1.19, meaning that its share price is 19% more volatile than the S&P 500.

Institutional and Insider Ownership

98.5% of Gates Industrial shares are held by institutional investors. Comparatively, 96.1% of Kadant shares are held by institutional investors. 2.7% of Gates Industrial shares are held by insiders. Comparatively, 1.3% of Kadant shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Summary

Kadant beats Gates Industrial on 8 of the 15 factors compared between the two stocks.

About Gates Industrial

Gates Industrial Corporation PLC designs and manufactures power transmission equipment. Its products serves harsh and hazardous industries such as agriculture, construction, manufacturing and energy, to everyday consumer applications such as printers, power washers, automatic doors and vacuum cleaners and virtually every form of transportation.

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.