Karat Packaging (NASDAQ:KRT) vs. Ferguson (NYSE:FERG) Critical Analysis

Ferguson (NYSE:FERG) and Karat Packaging (NASDAQ:KRT) are both industrials companies, but which is the better investment? We will contrast the two businesses based on the strength of their valuation, risk, earnings, dividends, analyst recommendations, institutional ownership and profitability.

Insider & Institutional Ownership

82.0% of Ferguson shares are owned by institutional investors. Comparatively, 25.2% of Karat Packaging shares are owned by institutional investors. 0.2% of Ferguson shares are owned by company insiders. Comparatively, 57.9% of Karat Packaging shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Analyst Ratings

This is a summary of current ratings and recommmendations for Ferguson and Karat Packaging, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Ferguson	0	6	10	2	2.78
Karat Packaging	1	2	3	0	2.33

Ferguson currently has a consensus price target of $285.57, indicating a potential upside of 28.04%. Karat Packaging has a consensus price target of $47.00, indicating a potential downside of 10.56%. Given Ferguson’s stronger consensus rating and higher possible upside, equities research analysts plainly believe Ferguson is more favorable than Karat Packaging.

Dividends

Ferguson pays an annual dividend of $3.56 per share and has a dividend yield of 1.6%. Karat Packaging pays an annual dividend of $1.88 per share and has a dividend yield of 3.6%. Ferguson pays out 41.8% of its earnings in the form of a dividend. Karat Packaging pays out 75.2% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Karat Packaging has increased its dividend for 2 consecutive years. Karat Packaging is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Earnings and Valuation

This table compares Ferguson and Karat Packaging”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Ferguson	$31.32 billion	1.38	$1.86 billion	$8.51	26.21
Karat Packaging	$467.74 million	2.24	$31.48 million	$2.50	21.02

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

Risk & Volatility

Ferguson has a beta of 1.13, meaning that its share price is 13% more volatile than the S&P 500. Comparatively, Karat Packaging has a beta of 0.84, meaning that its share price is 16% less volatile than the S&P 500.

Profitability

This table compares Ferguson and Karat Packaging’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Ferguson	6.82%	37.24%	12.31%
Karat Packaging	10.18%	30.62%	16.67%

Summary

Ferguson beats Karat Packaging on 12 of the 18 factors compared between the two stocks.

About Ferguson

Ferguson Enterprises Inc. distributes plumbing and heating products in North America. The company provides expertise, solutions, and products, including infrastructure, plumbing, appliances, fire, and fabrication, as well as heating, ventilation, and air conditioning (HVAC) to residential and non-residential customers. It also supplies specialist water and wastewater treatment products to residential, commercial, and infrastructure contractors, as well as supplies pipe, valves, and fittings solutions to industrial customers. In addition, it offers customized solutions, such as virtual design, fabrication, valve actuation, pre-assembly, kitting, installation, and project management services, as well as after-sales support that comprises warranty, credit, project-based billing, returns and maintenance, and repair and operations support. The company sells its products through a network of distribution centers, branches, counter service and specialist sales associates, showroom consultants, and e-commerce channels. Ferguson Enterprises Inc. was founded in 1953 and is headquartered in Newport News, Virginia.

About Karat Packaging

Karat Packaging Inc., together with its subsidiaries, engages in the manufacture and distribution of single-use disposable products in plastic, paper, biopolymer-based, and other compostable forms used in various restaurant and foodservice settings. It provides food and take-out containers, bags, tableware, cups, lids, cutlery, straws, specialty beverage ingredients, equipment, gloves, and other products under the Karat Earth brand. The company also provides new product development, design, printing, and logistics services. It offers its products to national and regional distributors, restaurant chains, retail establishments, and online customers. The company was founded in 2000 and is based in Chino, California.