Analyzing Komatsu (OTCMKTS:KMTUY) and Timken (NYSE:TKR)

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

Valuation and Earnings

This table compares Timken and Komatsu”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Timken	$4.58 billion	1.63	$288.40 million	$4.04	26.93
Komatsu	$27.45 billion	1.30	$2.48 billion	$2.78	13.85

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

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Timken	5.88%	13.13%	6.52%
Komatsu	8.92%	10.56%	5.94%

Volatility & Risk

Timken has a beta of 1.19, indicating that its stock price is 19% more volatile than the S&P 500. Comparatively, Komatsu has a beta of 1.09, indicating that its stock price is 9% more volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of current recommendations for Timken and Komatsu, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Timken	0	3	7	0	2.70
Komatsu	0	1	0	2	3.33

Timken currently has a consensus target price of $141.20, indicating a potential upside of 29.80%. Given Timken’s higher possible upside, analysts plainly believe Timken is more favorable than Komatsu.

Dividends

Timken pays an annual dividend of $1.44 per share and has a dividend yield of 1.3%. Komatsu pays an annual dividend of $0.89 per share and has a dividend yield of 2.3%. Timken pays out 35.6% of its earnings in the form of a dividend. Komatsu pays out 32.0% 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. Komatsu is clearly the better dividend stock, given its higher yield and lower payout ratio.

Insider & Institutional Ownership

89.1% of Timken shares are held by institutional investors. Comparatively, 0.2% of Komatsu shares are held by institutional investors. 8.1% of Timken shares are held by company insiders. Comparatively, 2.9% of Komatsu shares are held by company 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.

Summary

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

About Timken

Timken is a global manufacturer of engineered bearings and industrial motion products. Its offerings include bearings, seals, lubrication systems, chains, belts, couplings and related components designed to support the movement and operation of industrial equipment. The company serves customers across a range of industries, including aerospace, agriculture, construction, energy, rail, mining and manufacturing. In addition to products, Timken provides services such as equipment repair and maintenance to help customers manage machinery performance.

About Komatsu

Komatsu Ltd. is a Japanese manufacturer of construction, mining, utility and forestry equipment. Its products include excavators, bulldozers, wheel loaders, motor graders and mining trucks, along with machinery and services for forestry operations. The company also provides equipment maintenance, parts and technology solutions, including systems that support fleet management and automated operations. Founded in 1921 and headquartered in Tokyo, Komatsu has expanded from its origins as a Japanese industrial manufacturer into a global equipment and services provider.