Clean Diesel Technologies (NASDAQ: CDTI) and Federal Signal Corporation (NYSE:FSS) are both small-cap basic materials companies, but which is the superior investment? We will contrast the two businesses based on the strength of their institutional ownership, valuation, earnings, risk, dividends, analyst recommendations and profitabiliy.

Dividends

Federal Signal Corporation pays an annual dividend of $0.28 per share and has a dividend yield of 1.7%. Clean Diesel Technologies does not pay a dividend. Federal Signal Corporation pays out 45.2% of its earnings in the form of a dividend. Clean Diesel Technologies has raised its dividend for 2 consecutive years.

Institutional & Insider Ownership

1.0% of Clean Diesel Technologies shares are held by institutional investors. Comparatively, 84.6% of Federal Signal Corporation shares are held by institutional investors. 5.3% of Clean Diesel Technologies shares are held by company insiders. Comparatively, 4.2% of Federal Signal Corporation shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Valuation and Earnings

This table compares Clean Diesel Technologies and Federal Signal Corporation’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Clean Diesel Technologies $35.31 million 1.20 -$7.52 million ($3.21) -0.84
Federal Signal Corporation $712.90 million 1.39 $76.90 million $0.62 26.74

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

Analyst Ratings

This is a summary of recent recommendations for Clean Diesel Technologies and Federal Signal Corporation, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Clean Diesel Technologies 0 1 2 0 2.67
Federal Signal Corporation 0 0 2 0 3.00

Clean Diesel Technologies currently has a consensus target price of $4.17, suggesting a potential upside of 54.32%. Federal Signal Corporation has a consensus target price of $20.00, suggesting a potential upside of 20.63%. Given Clean Diesel Technologies’ higher probable upside, equities research analysts clearly believe Clean Diesel Technologies is more favorable than Federal Signal Corporation.

Profitability

This table compares Clean Diesel Technologies and Federal Signal Corporation’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Clean Diesel Technologies -67.54% -167.10% -35.01%
Federal Signal Corporation 5.26% 9.75% 5.97%

Volatility & Risk

Clean Diesel Technologies has a beta of 2.69, meaning that its stock price is 169% more volatile than the S&P 500. Comparatively, Federal Signal Corporation has a beta of 1.44, meaning that its stock price is 44% more volatile than the S&P 500.

Summary

Federal Signal Corporation beats Clean Diesel Technologies on 10 of the 15 factors compared between the two stocks.

Clean Diesel Technologies Company Profile

Clean Diesel Technologies, Inc. commercializes its material technology by manufacturing and distributing light duty vehicle catalysts, and heavy duty diesel emissions control systems and products to automakers, distributors, integrators and retrofitters. The Company operates through two business division segments: Catalyst, which develops and produces catalysts to reduce emissions from gasoline, diesel and natural gas combustion engines, and Heavy Duty Diesel Systems, which designs and manufactures verified exhaust emissions control solutions for a range of heavy duty diesel applications. It develops materials incorporating various base metals that replace platinum group metals (PGM) and rare earth metals in coatings on vehicle catalytic converters. Its technologies include Spinel, base-metal activated rhodium on Support, mixed phase catalyst, synergized PGM diesel oxidation catalyst (SPGM DOC), Platinum Plus, ARIS, and Exhaust Gas Recirculation and Selective Catalytic Reduction.

Federal Signal Corporation Company Profile

Federal Signal Corporation designs, manufactures and supplies a suite of products and integrated solutions for municipal, governmental, industrial and commercial customers. The Company’s segments include the Environmental Solutions Group and the Safety and Security Systems Group. Its Environmental Solutions Group manufactures and supplies a range of street sweeper vehicles, sewer cleaner and vacuum loader trucks, hydro-excavation trucks and waterblasting equipment. The products are sold to both municipal and industrial customers under the Elgin, Vactor, Guzzler and Jetstream brand names. Safety and Security Systems is a manufacturer and supplier of systems and products that law enforcement, fire rescue, emergency medical services, campuses military facilities and industrial sites use to protect people and property. It offers systems for campus and community alerting, emergency vehicles, first responder interoperable communications and industrial communications, among others.

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