Contrasting Federal Signal (NYSE:FSS) and IDEX (NYSE:IEX)

Federal Signal (NYSE:FSS) and IDEX (NYSE:IEX) are both industrials companies, but which is the superior business? We will compare the two companies based on the strength of their profitability, valuation, earnings, institutional ownership, analyst recommendations, risk and dividends.

Analyst Recommendations

This is a breakdown of current ratings and target prices for Federal Signal and IDEX, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Federal Signal	0	2	3	1	2.83
IDEX	0	2	9	0	2.82

Federal Signal currently has a consensus target price of $140.50, indicating a potential upside of 20.82%. IDEX has a consensus target price of $260.27, indicating a potential upside of 11.54%. Given Federal Signal’s stronger consensus rating and higher probable upside, equities research analysts plainly believe Federal Signal is more favorable than IDEX.

Risk & Volatility

Federal Signal has a beta of 1.23, meaning that its stock price is 23% more volatile than the S&P 500. Comparatively, IDEX has a beta of 0.97, meaning that its stock price is 3% less volatile than the S&P 500.

Dividends

Federal Signal pays an annual dividend of $0.60 per share and has a dividend yield of 0.5%. IDEX pays an annual dividend of $2.92 per share and has a dividend yield of 1.3%. Federal Signal pays out 12.9% of its earnings in the form of a dividend. IDEX pays out 42.0% 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. Federal Signal has raised its dividend for 3 consecutive years and IDEX has raised its dividend for 16 consecutive years. IDEX is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Insider & Institutional Ownership

92.7% of Federal Signal shares are owned by institutional investors. Comparatively, 98.0% of IDEX shares are owned by institutional investors. 3.3% of Federal Signal shares are owned by company insiders. Comparatively, 0.5% of IDEX shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company will outperform the market over the long term.

Profitability

This table compares Federal Signal and IDEX’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Federal Signal	11.66%	21.36%	13.07%
IDEX	14.49%	15.69%	9.10%

Valuation & Earnings

This table compares Federal Signal and IDEX”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Federal Signal	$2.18 billion	3.26	$246.60 million	$4.64	25.06
IDEX	$3.46 billion	4.98	$483.20 million	$6.95	33.57

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

Summary

IDEX beats Federal Signal on 10 of the 18 factors compared between the two stocks.

About Federal Signal

Federal Signal Corp. engages in the design and manufacture of products and integrated solutions for municipal, governmental, industrial, and commercial customers. It operates through the Environmental Solutions Group and Safety and Security Systems Group segments. The Environment Solutions Group segment is involved in the manufacture and supply of street sweeper vehicles, sewer cleaners, vacuum loader trucks, hydro-excavation trucks, and water blasting equipment. The Safety and Security Systems Group segment offers comprehensive systems and products that law enforcement, fire rescue, emergency medical services, campuses, military facilities, and industrial sites use to protect people and property. The company was founded in 1901 and is headquartered in Oak Brook, IL.

About IDEX

IDEX Corporation, together with its subsidiaries, provides applied solutions worldwide. The company operates through three segments: Fluid & Metering Technologies (FMT), Health & Science Technologies (HST), and Fire & Safety/Diversified Products (FSDP). The FMT segment designs, produces, and distributes positive displacement pumps, valves, small volume provers, flow meters, injectors, and other fluid-handling pump modules and systems, as well as flow monitoring and other services for the food, chemical, general industrial, water and wastewater, agricultural, and energy industries. The HST segment designs, produces, and distributes precision fluidics positive displacement pumps, powder and liquid processing technologies, drying systems, micro-precision components, pneumatic components and sealing solutions, high performance molded and extruded sealing components, custom mechanical and shaft seals, engineered hygienic mixers and valves, biocompatible medical devices and implantables, air compressors and blowers, optical components and coatings, laboratory and commercial equipment, and precision photonic solutions. This segment serves food and beverage, life sciences, analytical instruments, pharmaceutical and biopharmaceutical, industrial, semiconductor, automotive/transportation, medical/dental, energy, cosmetics, marine, chemical, wastewater and water treatment, research and aerospace/defense markets. The FSDP segment designs, produces, and distributes firefighting pumps, valves and controls, rescue tools, lifting bags, and other components and systems for the fire and rescue industry; engineered stainless steel banding and clamping devices for various industrial and commercial applications; and precision equipment for dispensing, metering, and mixing colorants and paints used in retail and commercial businesses. IDEX Corporation was incorporated in 1987 and is headquartered in Northbrook, Illinois.