Critical Survey: Eastern (NASDAQ:EML) versus Highway (NASDAQ:HIHO)

Highway (NASDAQ:HIHO) and Eastern (NASDAQ:EML) are both small-cap industrials companies, but which is the better stock? We will compare the two businesses based on the strength of their analyst recommendations, profitability, earnings, dividends, valuation, risk and institutional ownership.

Analyst Recommendations

This is a breakdown of recent ratings and target prices for Highway and Eastern, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Highway	1	0	0	0	1.00
Eastern	0	2	0	0	2.00

Dividends

Highway pays an annual dividend of $0.05 per share and has a dividend yield of 5.4%. Eastern pays an annual dividend of $0.44 per share and has a dividend yield of 1.6%. Highway pays out -15.6% of its earnings in the form of a dividend. Eastern pays out 32.8% 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. Highway is clearly the better dividend stock, given its higher yield and lower payout ratio.

Profitability

This table compares Highway and Eastern’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Highway	-28.08%	-25.93%	-15.72%
Eastern	3.44%	3.38%	1.89%

Volatility and Risk

Highway has a beta of 0.48, suggesting that its stock price is 52% less volatile than the S&P 500. Comparatively, Eastern has a beta of 0.87, suggesting that its stock price is 13% less volatile than the S&P 500.

Valuation & Earnings

This table compares Highway and Eastern”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Highway	$5.26 million	0.81	-$1.52 million	($0.32)	-2.87
Eastern	$248.97 million	0.68	$7.13 million	$1.34	20.85

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

Insider and Institutional Ownership

13.2% of Highway shares are owned by institutional investors. Comparatively, 77.0% of Eastern shares are owned by institutional investors. 32.1% of Highway shares are owned by company insiders. Comparatively, 18.4% of Eastern shares are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.

Summary

Eastern beats Highway on 10 of the 14 factors compared between the two stocks.

About Highway

Highway Holdings Limited, together with its subsidiaries, manufactures and supplies metal, plastic, electric, and electronic components, subassemblies, and finished products for original equipment manufacturers (OEMs) and contract manufacturers. It operates through two segments, Metal Stamping and Mechanical OEM; and Electric OEM. The company also trades in plastic injection products; and manufactures and assembles automation equipment. Its products are used in the manufacture of products, such as photocopiers, laser printers, print cartridges, electrical connectors, electrical circuits, vacuum cleaners, LED power supplies, stepping motors, pumps for dishwashers, and other washing machine components. In addition, the company assists customers in the design and development of the tooling used in the metal and plastic manufacturing process, as well as provides an array of other manufacturing and engineering services, including metal stamping, screen printing, plastic injection molding, pad printing, and electronic assembly of printed circuit boards. It operates in Hong Kong and China, Europe, North America, and other Asian countries. Highway Holdings Limited was incorporated in 1990 and is headquartered in Sheung Shui, Hong Kong.

About Eastern

The Eastern Company designs, manufactures, and sells engineered solutions to industrial markets in the United States and internationally. The company offers turnkey returnable packaging solutions, which are used in the assembly processes of vehicles, aircraft, and durable goods, as well as in production processes of plastic packaging products, packaged consumer goods, and pharmaceuticals; designs and manufactures blow mold tools and injection blow mold tooling products, and 2-step stretch blow molds and related components for the stretch blow molding industry; and supplies blow molds and change parts to the food, beverage, healthcare, and chemical industries. It also provides rotary latches, compression latches, draw latches, hinges, camlocks, key switches, padlocks, and handles; and development and program management services for custom electromechanical and mechanical systems for original equipment manufacturers (OEMs) and customer applications. In addition, the company designs and manufactures proprietary vision technology for OEMs and aftermarket applications, as well as offers aftermarket components to the heavy- and medium-duty truck, motorhome, and bus markets. The Eastern Company was founded in 1858 and is based in Shelton, Connecticut.