Contrasting Alamo Group (NYSE:ALG) & Timken (NYSE:TKR)

Timken (NYSE:TKR) and Alamo Group (NYSE:ALG) are both mid-cap industrials companies, but which is the better investment? We will compare the two businesses based on the strength of their risk, profitability, dividends, analyst recommendations, earnings, institutional ownership and valuation.

Profitability

This table compares Timken and Alamo Group’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Timken	5.43%	12.63%	6.21%
Alamo Group	6.08%	9.83%	6.86%

Valuation and Earnings

This table compares Timken and Alamo Group”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Timken	$4.58 billion	1.86	$288.40 million	$3.69	33.39
Alamo Group	$1.60 billion	1.32	$103.80 million	$8.34	20.78

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

Insider and Institutional Ownership

89.1% of Timken shares are owned by institutional investors. Comparatively, 92.4% of Alamo Group shares are owned by institutional investors. 8.1% of Timken shares are owned by company insiders. Comparatively, 1.1% of Alamo Group 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.

Risk & Volatility

Timken has a beta of 1.21, indicating that its share price is 21% more volatile than the S&P 500. Comparatively, Alamo Group has a beta of 1.09, indicating that its share price is 9% more volatile than the S&P 500.

Analyst Ratings

This is a summary of current ratings and target prices for Timken and Alamo Group, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Timken	0	3	7	0	2.70
Alamo Group	0	3	1	1	2.60

Timken presently has a consensus price target of $145.50, indicating a potential upside of 18.09%. Alamo Group has a consensus price target of $188.00, indicating a potential upside of 8.47%. Given Timken’s stronger consensus rating and higher probable upside, equities research analysts plainly believe Timken is more favorable than Alamo Group.

Dividends

Timken pays an annual dividend of $1.44 per share and has a dividend yield of 1.2%. Alamo Group pays an annual dividend of $1.36 per share and has a dividend yield of 0.8%. Timken pays out 39.0% of its earnings in the form of a dividend. Alamo Group pays out 16.3% 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. Timken has raised its dividend for 12 consecutive years and Alamo Group has raised its dividend for 14 consecutive years.

Summary

Timken beats Alamo Group on 11 of the 18 factors compared between the two stocks.

About Timken

The Timken Company designs, manufactures, and sells engineered bearings and industrial motion products, and related services in the United States and internationally. The company's Engineered Bearings segment provides various bearing products, including tapered, spherical, and cylindrical roller bearings; plain bearings, metal-polymer bearings, and rod end bearings; radial, angular, and precision ball bearings; thrust and specialty ball bearings; journal bearings; and housed or mounted bearings. This segment serves wind energy, agriculture, construction, food and beverage, metals and mining, automotive and truck, aerospace, rail, and other industries under the Timken, GGB, and Fafnir brands. Its Industrial Motion segment offers a portfolio of engineered products comprising industrial drives, automatic lubrication systems, linear motion products and systems, chains, belts, seals, couplings, filtration systems, and industrial clutches and brakes. It also provides industrial drivetrain and bearing repairing services. This segment serves a range of industries, such as solar energy, automation, construction, agriculture and turf, passenger rail, marine, aerospace, packaging and logistics, medical, and others under the Philadelphia Gear, Cone Drive, Rollon, Nadella, Groeneveld, BEKA, Diamond, Drives, Timken Belts, Spinea, Des-Case, Lagersmit, Lovejoy, and PT Tech brands. The Timken Company was founded in 1899 and is headquartered in North Canton, Ohio.

About Alamo Group

Alamo Group Inc. designs, manufactures, distributes, and services vegetation management and infrastructure maintenance equipment for governmental, industrial, and agricultural uses worldwide. It operates through two segments, Vegetation Management and Industrial Equipment. Its Vegetation Management Division segment offers hydraulically-powered and tractor – and off-road chassis mounted mowers, other cutters and replacement parts for heavy-duty and intensive uses and heavy duty, tractor- and truck-mounted mowing and vegetation maintenance equipment, and replacement parts. This segment also provides rotary and finishing mowers, flail and disc mowers, front-end loaders, backhoes, rotary tillers, posthole diggers, scraper blades and replacement parts, zero turn radius mowers, cutting parts, plain and hard-faced replacement tillage tools, disc blades, and fertilizer application components; aftermarket agricultural parts, heavy-duty mechanical rotary mowers, snow blowers, rock removal equipment, tractor attachments, agricultural implements, hydraulic and boom-mounted hedge and grass cutters, hedgerow cutters, industrial grass mowers, agricultural seedbed preparation cultivators, self-propelled sprayers and multi-drive load-carrying vehicles, and cutting blades. The company's Industrial Equipment Division segment offers truck-mounted air vacuum, mechanical broom, and regenerative air sweepers, pothole patchers, leaf collection equipment and replacement brooms, parking lot and street sweepers, excavators, catch basin cleaners, and roadway debris vacuum systems, as well as truck-mounted vacuum machines, combination sewer cleaners, and hydro excavators. This segment also offers ice control products, snowplows and heavy duty snow removal equipment, hitches, attachments, and graders; and public works and runway maintenance products, parts, and services, and high pressure cleaning systems and trenchers. The company was founded in 1955 and is headquartered in Seguin, Texas.