Lear (NYSE:LEA) and BRP (NASDAQ:DOOO) Critical Survey

Lear (NYSE:LEA) and BRP (NASDAQ:DOOO) are both mid-cap auto/tires/trucks companies, but which is the superior business? We will contrast the two businesses based on the strength of their dividends, earnings, analyst recommendations, institutional ownership, risk, profitability and valuation.

Volatility and Risk

Lear has a beta of 1.21, indicating that its share price is 21% more volatile than the S&P 500. Comparatively, BRP has a beta of 1.26, indicating that its share price is 26% more volatile than the S&P 500.

Analyst Recommendations

This is a summary of recent ratings and price targets for Lear and BRP, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Lear	0	11	3	1	2.33
BRP	0	4	8	2	2.86

Lear presently has a consensus price target of $139.38, indicating a potential upside of 5.84%. BRP has a consensus price target of $94.75, indicating a potential upside of 77.04%. Given BRP’s stronger consensus rating and higher possible upside, analysts plainly believe BRP is more favorable than Lear.

Dividends

Lear pays an annual dividend of $3.08 per share and has a dividend yield of 2.3%. BRP pays an annual dividend of $0.61 per share and has a dividend yield of 1.1%. Lear pays out 30.8% of its earnings in the form of a dividend. BRP pays out 164.9% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. BRP has increased its dividend for 2 consecutive years. Lear is clearly the better dividend stock, given its higher yield and lower payout ratio.

Institutional & Insider Ownership

97.0% of Lear shares are held by institutional investors. 1.0% of Lear shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company is poised for long-term growth.

Valuation & Earnings

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

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Lear	$23.26 billion	0.28	$436.80 million	$10.00	13.17
BRP	$8.03 billion	0.49	-$154.60 million	$0.37	144.65

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

Profitability

This table compares Lear and BRP’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Lear	2.25%	13.69%	4.71%
BRP	0.45%	67.30%	4.72%

Summary

BRP beats Lear on 10 of the 18 factors compared between the two stocks.

About Lear

Lear Corporation designs, develops, engineers, manufactures, assembles, and supplies automotive seating, and electrical distribution systems and related components for automotive original equipment manufacturers in North America, Europe, Africa, Asia, and South America. Its Seating segment offers seat systems, seat subsystems, keyseat components, seat trim covers, seat mechanisms, seat foams, and headrests, as well as surface materials, such as leather and fabric for automobiles and light trucks, compact cars, pick-up trucks, and sport utility vehicles. The company’s E-Systems segment provides electrical distribution and connection systems that route electrical signals and networks; and manage electrical power within the vehicle for various powertrains. This segment’s products comprise wire harnesses, terminals and connectors, engineered components, and junction boxes; electronic system products, including body domain control modules, smart and passive junction boxes, gateway and communication modules, integrated power modules, and high voltage switching and power control systems. It also offers software and connected services comprising Xevo Market, an in-vehicle commerce and service platform; and software and services for the cloud, vehicles, and mobile devices. In addition, this segment provides cybersecurity software; advanced vehicle positioning for automated and autonomous driving applications; and short-range communication and cellular protocols for vehicle connectivity. It offers its products and services under the XEVO, GUILFORD, EAGLE OTTAWA, ConfigurE+, INTUTM, LEAR CONNEXUSTM, EXO, JOURNEYWARE, ProTec, SMART JUNCTION BOX, STRUCSURE, AVENTINO, and TeXstyle brands. Lear Corporation was founded in 1917 and is headquartered in Southfield, Michigan.

About BRP

BRP Inc., together with its subsidiaries, designs, develops, manufactures, distributes, and markets powersports vehicles and marine products in the United States, Canada, Europe, the Asia Pacific, Mexico, Austria, and internationally. The Powersports segment offers year-round products, such as Can-Am all-terrain vehicles, side-by-side vehicles, and three-wheeled vehicles; and seasonal products, including Ski-Doo and Lynx snowmobiles, Sea-Doo personal watercrafts and pontoons, Rotax engines for karts and recreational aircraft, and Pinion gearboxes with smart shift systems. The Marine segment provides Alumacraft, Manitou, Quintrex, Stacer, and Yellowfin boats; Rotax engines for jet boats; and Rotax S outboard engine. The company was formerly known as J.A. Bombardier (J.A.B.) Inc. and changed its name to BRP Inc. in April 2013. BRP Inc. was founded in 1937 and is headquartered in Valcourt, Canada.