Graham (NYSE:GHM) & Eastern (NASDAQ:EML) Critical Review

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

Risk & Volatility

Graham has a beta of 1.08, meaning that its share price is 8% more volatile than the S&P 500. Comparatively, Eastern has a beta of 0.87, meaning that its share price is 13% less volatile than the S&P 500.

Institutional & Insider Ownership

69.5% of Graham shares are held by institutional investors. Comparatively, 77.0% of Eastern shares are held by institutional investors. 2.4% of Graham shares are held by insiders. Comparatively, 18.4% of Eastern shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock will outperform the market over the long term.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Graham	4.53%	11.09%	5.17%
Eastern	3.44%	3.38%	1.89%

Analyst Ratings

This is a summary of recent ratings and recommmendations for Graham and Eastern, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Graham	0	2	3	0	2.60
Eastern	0	2	0	0	2.00

Graham presently has a consensus target price of $123.33, suggesting a potential upside of 80.48%. Given Graham’s stronger consensus rating and higher probable upside, analysts clearly believe Graham is more favorable than Eastern.

Valuation & Earnings

This table compares Graham and Eastern”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Graham	$245.29 million	3.27	$12.50 million	$1.04	65.71
Eastern	$248.97 million	0.58	$7.13 million	$1.34	18.01

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

Summary

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

About Graham

Graham Corporation, together with its subsidiaries, designs and manufactures fluid, power, heat transfer, and vacuum equipment for chemical and petrochemical processing, defense, space, petroleum refining, cryogenic, energy, and other industries. It offers power plant systems, including ejectors and surface condensers; torpedo ejection, propulsion, and power systems, such as turbines, alternators, regulators, pumps, and blowers; and thermal management systems comprising pumps, blowers, and drive electronics for defense sector. The company also provides rocket propulsion systems consisting of turbopumps and fuel pumps; cooling systems, which include pumps, compressors, fans, and blowers; and life support systems that comprise fans, pumps, and blowers for space industry. In addition, it offers heat transfer and vacuum systems, including ejectors, process and surface condensers, liquid ring pumps, heat exchangers, and nozzles; power generation systems, such as turbines, generators, compressors, and pumps; and thermal management systems comprising pumps, blowers, and electronics for energy sector. Further, the company offers heat transfer and vacuum systems consisting of ejectors, process and surface condensers, liquid ring pumps, heat exchangers, and nozzles for chemical and petrochemical processing industry. The company also services and sells spare parts for its equipment. It sells its products directly in the United States, the Middle East, Canada, Asia, South America, and internationally. Graham Corporation was founded in 1936 and is headquartered in Batavia, New York.

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.