Tennant (NYSE: TNC) and Key Technology (NASDAQ:KTEC) are both small-cap industrial products companies, but which is the superior business? We will contrast the two companies based on the strength of their analyst recommendations, valuation, earnings, profitability, institutional ownership, risk and dividends.

Risk & Volatility

Tennant has a beta of 1.07, indicating that its stock price is 7% more volatile than the S&P 500. Comparatively, Key Technology has a beta of 1.06, indicating that its stock price is 6% more volatile than the S&P 500.

Institutional and Insider Ownership

89.4% of Tennant shares are held by institutional investors. Comparatively, 44.6% of Key Technology shares are held by institutional investors. 5.7% of Tennant shares are held by company insiders. Comparatively, 29.4% of Key Technology shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Earnings and Valuation

This table compares Tennant and Key Technology’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Tennant $873.73 million 1.24 $91.45 million $1.12 54.20
Key Technology $129.89 million 0.73 $10.16 million $0.52 28.25

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

Analyst Recommendations

This is a breakdown of recent recommendations and price targets for Tennant and Key Technology, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Tennant 0 2 0 0 2.00
Key Technology 0 0 0 0 N/A

Tennant presently has a consensus price target of $65.00, suggesting a potential upside of 7.08%. Given Tennant’s higher possible upside, analysts plainly believe Tennant is more favorable than Key Technology.

Profitability

This table compares Tennant and Key Technology’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Tennant 2.32% 15.39% 7.19%
Key Technology 2.58% 5.27% 3.31%

Dividends

Tennant pays an annual dividend of $0.84 per share and has a dividend yield of 1.4%. Key Technology does not pay a dividend. Tennant pays out 75.0% of its earnings in the form of a dividend. Tennant has raised its dividend for 45 consecutive years.

Summary

Tennant beats Key Technology on 11 of the 15 factors compared between the two stocks.

About Tennant

Tennant Company is engaged in designing, manufacturing and marketing of cleaning solutions. The Company’s segments are Americas; Europe, Middle East, Africa, and Asia Pacific. The Company offers a range of products, including floor maintenance and outdoor cleaning equipment, detergent-free and other sustainable cleaning technologies, aftermarket parts and consumables, equipment maintenance and repair service, specialty surface coatings and asset management solutions. Its products are used in various types of environments, including retail establishments, distribution centers, factories and warehouses, public venues such as arenas and stadiums, office buildings, schools and universities, hospitals and clinics, parking lots and streets. The Company markets and sells its products under various brands: Tennant, Nobles, Green Machines, Alfa Uma Empresa Tennant, IRIS, Orbio IPC, IPC Foma, IPC Eagle, IPC Gansow, ICA, Vaclensa, Portotecnica, Sirio and Soteco, Ready System, Euromop, and Pulex.

About Key Technology

Key Technology, Inc. is a supplier of process automation solutions to the food processing industry and other industries, such as tobacco and pharmaceuticals. The Company designs, manufactures, sells and services automation equipment that processes product streams of discrete pieces. These systems integrate electro-optical automated inspection and digital sorting systems with other processing systems that include specialized conveying and preparation equipment. The Company provides parts and service for each of its product lines to customers around the world. Its automated inspection systems are used in various applications to detect and remove defects and foreign material from the product stream. It offers conveying and processing equipment, which are utilized throughout various industries to move and process product within a production plant. Its Integrated Solutions Group (ISG) provides integrated whole-line solutions. It has an installed base of inspection and processing systems.

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