Comparing AAON (NASDAQ:AAON) & Armstrong World Industries (NYSE:AWI)

AAON (NASDAQ:AAON) and Armstrong World Industries (NYSE:AWI) are both mid-cap industrials companies, but which is the superior investment? We will compare the two businesses based on the strength of their earnings, risk, dividends, analyst recommendations, profitability, institutional ownership and valuation.

Dividends

AAON pays an annual dividend of $0.40 per share and has a dividend yield of 0.7%. Armstrong World Industries pays an annual dividend of $1.49 per share and has a dividend yield of 0.9%. AAON pays out 20.8% of its earnings in the form of a dividend. Armstrong World Industries pays out 19.9% 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. AAON has increased its dividend for 2 consecutive years and Armstrong World Industries has increased its dividend for 1 consecutive years. Armstrong World Industries is clearly the better dividend stock, given its higher yield and lower payout ratio.

Insider & Institutional Ownership

70.8% of AAON shares are held by institutional investors. Comparatively, 98.9% of Armstrong World Industries shares are held by institutional investors. 18.1% of AAON shares are held by company insiders. Comparatively, 1.2% of Armstrong World Industries shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company is poised for long-term growth.

Analyst Recommendations

This is a breakdown of current ratings and target prices for AAON and Armstrong World Industries, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
AAON	0	3	4	0	2.57
Armstrong World Industries	0	2	7	0	2.78

AAON presently has a consensus target price of $120.00, indicating a potential upside of 109.83%. Armstrong World Industries has a consensus target price of $203.12, indicating a potential upside of 18.50%. Given AAON’s higher possible upside, research analysts clearly believe AAON is more favorable than Armstrong World Industries.

Volatility & Risk

AAON has a beta of 1.45, indicating that its share price is 45% more volatile than the S&P 500. Comparatively, Armstrong World Industries has a beta of 1.14, indicating that its share price is 14% more volatile than the S&P 500.

Earnings and Valuation

This table compares AAON and Armstrong World Industries”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
AAON	$1.44 billion	3.27	$107.59 million	$1.92	29.79
Armstrong World Industries	$1.62 billion	4.42	$308.70 million	$7.49	22.88

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

Profitability

This table compares AAON and Armstrong World Industries’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
AAON	8.24%	17.32%	9.33%
Armstrong World Industries	18.38%	38.06%	17.16%

Summary

Armstrong World Industries beats AAON on 12 of the 17 factors compared between the two stocks.

About AAON

AAON, Inc., together with its subsidiaries, engages in engineering, manufacturing, marketing, and selling air conditioning and heating equipment in the United States and Canada. The company operates through three segments: AAON Oklahoma, AAON Coil Products, and BASX. It offers rooftop units, data center cooling solutions, cleanroom systems, chillers, packaged outdoor mechanical rooms, air handling units, makeup air units, energy recovery units, condensing units, geothermal/water-source heat pumps, coils, and controls. The company markets and sells its products to retail, manufacturing, educational, lodging, supermarket, data centers, medical and pharmaceutical, and other commercial industries. It sells its products through a network of independent manufacturer representative organizations and internal sales force, as well as online. The company was incorporated in 1987 and is based in Tulsa, Oklahoma.

About Armstrong World Industries

Armstrong World Industries, Inc., together with its subsidiaries, engages in the design, manufacture, and sale of ceiling and wall solutions in the Americas. It operates through Mineral Fiber and Architectural Specialties segments. The company offers mineral fiber, fiberglass wool, metal, wood, felt, wood fiber, and glass-reinforced-gypsum; ceiling component products, such as ceiling perimeters and trims, as well as grid products that support drywall ceiling systems; ceilings, walls, and facades for use in commercial settings; and manufactures ceiling suspension system (grid) products. It serves commercial and residential construction markets, as well as renovation of existing buildings sectors. The company sells its products to resale distributors, ceiling system contractors, wholesalers, and retailers comprising large home centers. Armstrong World Industries, Inc. was founded in 1860 and is headquartered in Lancaster, Pennsylvania.