Financial Contrast: Federal Signal (NYSE:FSS) and Deere & Company (NYSE:DE)

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

Institutional and Insider Ownership

68.6% of Deere & Company shares are held by institutional investors. Comparatively, 92.7% of Federal Signal shares are held by institutional investors. 0.3% of Deere & Company shares are held by insiders. Comparatively, 3.3% of Federal Signal 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.

Dividends

Deere & Company pays an annual dividend of $6.48 per share and has a dividend yield of 0.9%. Federal Signal pays an annual dividend of $0.60 per share and has a dividend yield of 0.5%. Deere & Company pays out 36.0% of its earnings in the form of a dividend. Federal Signal pays out 12.9% 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. Deere & Company has raised its dividend for 4 consecutive years and Federal Signal has raised its dividend for 3 consecutive years. Deere & Company is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Ratings

This is a breakdown of current ratings and recommmendations for Deere & Company and Federal Signal, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Deere & Company	0	8	17	0	2.68
Federal Signal	0	2	3	1	2.83

Deere & Company presently has a consensus price target of $686.10, suggesting a potential downside of 0.10%. Federal Signal has a consensus price target of $140.50, suggesting a potential upside of 20.82%. Given Federal Signal’s stronger consensus rating and higher probable upside, analysts clearly believe Federal Signal is more favorable than Deere & Company.

Risk and Volatility

Deere & Company has a beta of 0.86, suggesting that its stock price is 14% less volatile than the S&P 500. Comparatively, Federal Signal has a beta of 1.23, suggesting that its stock price is 23% more volatile than the S&P 500.

Valuation & Earnings

This table compares Deere & Company and Federal Signal”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Deere & Company	$45.68 billion	4.05	$5.03 billion	$18.00	38.15
Federal Signal	$2.18 billion	3.26	$246.60 million	$4.64	25.06

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

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Deere & Company	10.16%	18.10%	4.60%
Federal Signal	11.66%	21.36%	13.07%

Summary

Federal Signal beats Deere & Company on 10 of the 18 factors compared between the two stocks.

About Deere & Company

Deere & Co. engages in the manufacture and distribution of equipment used in agriculture, construction, forestry, and turf care. It operates through the following segments: Agriculture and Turf, Construction and Forestry, and Financial Services. The Agriculture and Turf segment focuses on the distribution and manufacture of a full line of agriculture and turf equipment and related service parts. The Construction and Forestry segment offers machines and service parts used in construction, earthmoving, road building, material handling and timber harvesting. The Financial Services segment finances sales and leases by John Deere dealers of new and used agriculture and turf equipment and construction and forestry equipment. The company was founded by John Deere in 1837 and is headquartered in Moline, IL.

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.