Critical Survey: Gates Industrial (NYSE:GTES) and Komatsu (OTCMKTS:KMTUY)

Gates Industrial (NYSE:GTES) and Komatsu (OTCMKTS:KMTUY) are both industrials companies, but which is the superior investment? We will contrast the two companies based on the strength of their valuation, earnings, analyst recommendations, institutional ownership, risk, profitability and dividends.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Gates Industrial	10.37%	10.11%	5.27%
Komatsu	8.93%	10.51%	5.93%

Insider and Institutional Ownership

98.5% of Gates Industrial shares are held by institutional investors. Comparatively, 0.2% of Komatsu shares are held by institutional investors. 2.8% of Gates Industrial shares are held by insiders. Comparatively, 2.9% of Komatsu shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.

Earnings and Valuation

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

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Gates Industrial	$3.44 billion	1.90	$251.40 million	$1.41	18.31
Komatsu	$27.45 billion	1.53	$2.48 billion	$2.73	16.54

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

Analyst Recommendations

This is a summary of current recommendations and price targets for Gates Industrial and Komatsu, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Gates Industrial	0	3	9	0	2.75
Komatsu	0	1	0	2	3.33

Gates Industrial presently has a consensus target price of $32.45, suggesting a potential upside of 25.69%. Given Gates Industrial’s higher possible upside, analysts clearly believe Gates Industrial is more favorable than Komatsu.

Volatility & Risk

Gates Industrial has a beta of 1.28, suggesting that its stock price is 28% more volatile than the S&P 500. Comparatively, Komatsu has a beta of 1.07, suggesting that its stock price is 7% more volatile than the S&P 500.

Summary

Komatsu beats Gates Industrial on 8 of the 15 factors compared between the two stocks.

About Gates Industrial

Gates Industrial Corporation PLC designs and manufactures power transmission equipment. Its products serves harsh and hazardous industries such as agriculture, construction, manufacturing and energy, to everyday consumer applications such as printers, power washers, automatic doors and vacuum cleaners and virtually every form of transportation.

About Komatsu

Komatsu Ltd. manufactures and sells construction, mining, and utility equipment in Japan, the Americas, Europe, China, Rest of Asia, Oceania, the Middle East, Africa, and CIS countries. It operates through three segments: Construction, Mining and Utility Equipment; Retail Finance; and Industrial Machinery and Others. The company offers construction and mining equipment, including excavators, wheel loaders, bulldozers, motor graders, dump truck, rope and hybrid shovels, electric wheel loaders, continuous miners, and jumbo drills. It also provides forestry equipment, including harvesters, forwarders, feller bunchers, excavators, mini excavators, and forklifts; demolition, waste, and recycling equipment, such as mobile crushers, hydraulic excavators, wheel loaders, and mini shovels; material handling equipment; and tunnel-boring machines, pipe layers, towing tractors, and engines. In addition, the company offers industrial machinery, including presses, sheet-metal machinery, 3D laser cutting machine, transfer machines, battery manufacturing equipment, wire saws, thermos modules, thermoelectric generation module, and temperature control products; quarry equipment; agricultural and livestock equipment; EH sensor device; iron and steel casting products; and logistics equipment. Further, the company provides retail financing; construction machinery rental services; remanufactured products; other support services; transportation, warehousing, packing, and other services; and purchases and sells used equipment. Komatsu Ltd. was founded in 1884 and is headquartered in Tokyo, Japan.