Financial Analysis: Fanuc (OTCMKTS:FANUY) and Kadant (NYSE:KAI)

Kadant (NYSE:KAI) and Fanuc (OTCMKTS:FANUY) are both industrials companies, but which is the superior business? We will contrast the two businesses based on the strength of their risk, valuation, institutional ownership, analyst recommendations, profitability, dividends and earnings.

Volatility & Risk

Kadant has a beta of 1.17, suggesting that its share price is 17% more volatile than the S&P 500. Comparatively, Fanuc has a beta of 1.04, suggesting that its share price is 4% more volatile than the S&P 500.

Insider & Institutional Ownership

96.1% of Kadant shares are owned by institutional investors. Comparatively, 1.5% of Fanuc shares are owned by institutional investors. 1.3% of Kadant shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Dividends

Kadant pays an annual dividend of $1.44 per share and has a dividend yield of 0.5%. Fanuc pays an annual dividend of $0.21 per share and has a dividend yield of 1.1%. Kadant pays out 15.5% of its earnings in the form of a dividend. Fanuc pays out 33.9% 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. Kadant has increased its dividend for 12 consecutive years.

Profitability

This table compares Kadant and Fanuc’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Kadant	9.52%	13.16%	7.67%
Fanuc	20.11%	9.60%	8.65%

Analyst Recommendations

This is a summary of current ratings and recommmendations for Kadant and Fanuc, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Kadant	0	3	1	0	2.25
Fanuc	0	2	0	1	2.67

Kadant presently has a consensus target price of $357.50, suggesting a potential upside of 34.02%. Given Kadant’s higher probable upside, equities analysts plainly believe Kadant is more favorable than Fanuc.

Valuation and Earnings

This table compares Kadant and Fanuc”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Kadant	$1.05 billion	2.99	$101.97 million	$9.30	28.68
Fanuc	$5.70 billion	6.52	$1.10 billion	$0.62	30.48

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

About Kadant

Kadant Inc. supplies technologies and engineered systems worldwide. It operates in three segments: Flow Control, Industrial Processing, and Material Handling. The Flow Control segment develops, manufactures, and markets fluid-handling systems and equipment, such as rotary joints, syphons, turbulator bars, expansion joints, and engineered steam and condensate systems; and doctoring, cleaning, and filtration systems and related consumables consisting of doctor systems and holders, doctor blades, cleaning shower and fabric-conditioning systems, forming systems and wear surfaces, and water-filtration systems. The Industrial Processing segment develops, manufactures, and markets ring and rotary debarkers, stranders, chippers, engineered knife systems, industrial automation and control, recycling and approach flow systems, and virgin pulping process equipment for use in the packaging, tissue, wood products, and alternative fuel industries. The Material Handling segment offers conveying and vibratory equipment, and baling products; and manufactures and sells biodegradable absorbent granules for carriers in agricultural, home lawn and garden, professional lawn, turf, and ornamental applications, as well as for oil and grease absorption. The company markets and sells its products, services, and systems through direct sales, independent sales agents, and distributors. The company was formerly known as Thermo Fibertek, Inc. and changed its name to Kadant Inc. in July 2001. Kadant Inc. was incorporated in 1991 and is headquartered in Westford, Massachusetts.

About Fanuc

FANUC Corporation provides factory automation products in Japan, the Americas, Europe, China, the rest of Asia, and internationally. The company offers CNC series products, servo motors, lasers, robots, compact machining centers, electric injection molding machines, wire electrical discharge machines, and ultra-precision machines. It also provides FANUC intelligent edge link and drive system, an open platform for the manufacturing industry. FANUC Corporation was incorporated in 1950 and is headquartered in Yamanashi, Japan.