Financial Analysis: L.B. Foster (NASDAQ:FSTR) and Federal Signal (NYSE:FSS)

Federal Signal (NYSE:FSS) and L.B. Foster (NASDAQ:FSTR) are both industrials companies, but which is the better stock? We will contrast the two businesses based on the strength of their profitability, analyst recommendations, institutional ownership, earnings, risk, dividends and valuation.

Analyst Recommendations

This is a breakdown of recent ratings and target prices for Federal Signal and L.B. Foster, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Federal Signal	0	2	3	1	2.83
L.B. Foster	0	3	1	0	2.25

Federal Signal currently has a consensus target price of $140.50, indicating a potential upside of 20.27%. L.B. Foster has a consensus target price of $32.00, indicating a potential downside of 10.69%. Given Federal Signal’s stronger consensus rating and higher probable upside, analysts clearly believe Federal Signal is more favorable than L.B. Foster.

Volatility and Risk

Federal Signal has a beta of 1.23, suggesting that its share price is 23% more volatile than the S&P 500. Comparatively, L.B. Foster has a beta of 1.13, suggesting that its share price is 13% more volatile than the S&P 500.

Profitability

This table compares Federal Signal and L.B. Foster’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Federal Signal	11.66%	21.36%	13.07%
L.B. Foster	2.04%	7.61%	4.03%

Institutional and Insider Ownership

92.7% of Federal Signal shares are held by institutional investors. Comparatively, 80.6% of L.B. Foster shares are held by institutional investors. 3.3% of Federal Signal shares are held by company insiders. Comparatively, 7.6% of L.B. Foster shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company will outperform the market over the long term.

Valuation and Earnings

This table compares Federal Signal and L.B. Foster”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Federal Signal	$2.45 billion	2.91	$246.60 million	$4.64	25.18
L.B. Foster	$540.01 million	0.70	$7.55 million	$1.05	34.12

Federal Signal has higher revenue and earnings than L.B. Foster. Federal Signal is trading at a lower price-to-earnings ratio than L.B. Foster, indicating that it is currently the more affordable of the two stocks.

Summary

Federal Signal beats L.B. Foster on 13 of the 15 factors compared between the two stocks.

About Federal Signal

Federal Signal Corp. engages in the design and manufacture of products and integrated solutions for municipal, governmental, industrial, and commercial customers. It operates through the Environmental Solutions Group and Safety and Security Systems Group segments. The Environment Solutions Group segment is involved in the manufacture and supply of street sweeper vehicles, sewer cleaners, vacuum loader trucks, hydro-excavation trucks, and water blasting equipment. The Safety and Security Systems Group segment offers comprehensive systems and products that law enforcement, fire rescue, emergency medical services, campuses, military facilities, and industrial sites use to protect people and property. The company was founded in 1901 and is headquartered in Oak Brook, IL.

About L.B. Foster

L.B. Foster Company provides engineered and manufactured products and services for the building and infrastructure projects in the United States, Canada, the United Kingdom, and internationally. It operates through two segments: Rail, Technologies, and Services; and Infrastructure Solutions. The Rail, Technologies, and Services segment offers new rail to passenger and short line freight railroads, industrial companies, and rail contractors, as well as used rails; rail accessories, such as rack spikes, bolts, angle bars, tie plates, and other products; insulated rail joints and related accessories; fixation fasteners, coverboards, and special accessories; and trackwork products. This segment also provides engineered concrete railroad ties, friction management products and application systems, railroad condition monitoring systems and equipment including wheel impact load detection systems, wayside data collection and management systems, and rockfall, flood, earthworks, and bridge strike monitoring; and aftermarket services. The Infrastructure Solutions segment manufactures precast concrete products for use as restrooms, concession stands, and protective storage buildings under the CXT brand for national, state, and municipal parks; and manufactures sounds walls, bridge beams, box culverts, septic tanks, and other custom pre-stressed and precast concrete products. This segment also provides steel bridge products; corrosion protection solutions; concrete-reinforced steel grid decking, open steel grid deck, aluminum bridge railing, and stay-in-place steel bridge forms; cuts, threads, and paints pipe; threading services for water well applications; protective pipeline coating services; and turnkey solutions for metering and injection systems for oil and gas markets. L.B. Foster Company was founded in 1902 and is headquartered in Pittsburgh, Pennsylvania.