Parker-Hannifin (NYSE:PH) and Art’s-Way Manufacturing (NASDAQ:ARTW) Critical Review

Parker-Hannifin (NYSE:PH) and Art’s-Way Manufacturing (NASDAQ:ARTW) are both industrials companies, but which is the superior business? We will contrast the two businesses based on the strength of their earnings, profitability, institutional ownership, valuation, dividends, analyst recommendations and risk.

Institutional and Insider Ownership

82.4% of Parker-Hannifin shares are owned by institutional investors. Comparatively, 2.9% of Art’s-Way Manufacturing shares are owned by institutional investors. 0.3% of Parker-Hannifin shares are owned by company insiders. Comparatively, 51.5% of Art’s-Way Manufacturing shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Profitability

This table compares Parker-Hannifin and Art’s-Way Manufacturing’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Parker-Hannifin	16.97%	28.48%	13.49%
Art’s-Way Manufacturing	-1.65%	-3.07%	-1.76%

Valuation and Earnings

This table compares Parker-Hannifin and Art’s-Way Manufacturing”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Parker-Hannifin	$21.50 billion	5.61	$3.65 billion	$28.49	33.57
Art’s-Way Manufacturing	$25.99 million	0.68	$1.03 million	($0.09)	-38.00

Parker-Hannifin has higher revenue and earnings than Art’s-Way Manufacturing. Art’s-Way Manufacturing is trading at a lower price-to-earnings ratio than Parker-Hannifin, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a breakdown of recent ratings for Parker-Hannifin and Art’s-Way Manufacturing, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Parker-Hannifin	0	5	18	0	2.78
Art’s-Way Manufacturing	1	0	0	0	1.00

Parker-Hannifin currently has a consensus target price of $1,158.65, indicating a potential upside of 21.16%. Given Parker-Hannifin’s stronger consensus rating and higher probable upside, analysts plainly believe Parker-Hannifin is more favorable than Art’s-Way Manufacturing.

Volatility and Risk

Parker-Hannifin has a beta of 1.12, suggesting that its stock price is 12% more volatile than the S&P 500. Comparatively, Art’s-Way Manufacturing has a beta of 1.06, suggesting that its stock price is 6% more volatile than the S&P 500.

Dividends

Parker-Hannifin pays an annual dividend of $8.00 per share and has a dividend yield of 0.8%. Art’s-Way Manufacturing pays an annual dividend of $0.05 per share and has a dividend yield of 1.5%. Parker-Hannifin pays out 28.1% of its earnings in the form of a dividend. Art’s-Way Manufacturing pays out -55.6% 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. Parker-Hannifin has increased its dividend for 70 consecutive years. Art’s-Way Manufacturing is clearly the better dividend stock, given its higher yield and lower payout ratio.

Summary

Parker-Hannifin beats Art’s-Way Manufacturing on 14 of the 17 factors compared between the two stocks.

About Parker-Hannifin

Parker-Hannifin Corporation manufactures and sells motion and control technologies and systems for various mobile, industrial, and aerospace markets worldwide. The company operates through two segments: Diversified Industrial and Aerospace Systems. The Diversified Industrial segment offers sealing, shielding, thermal products and systems, adhesives, coatings, and noise vibration and harshness solutions; filters, systems, and diagnostics solutions to ensure purity and remove contaminants from fuel, air, oil, water, and other liquids and gases; connectors used in fluid and gas handling; and hydraulic, pneumatic, and electromechanical components and systems for builders and users of mobile and industrial machinery and equipment. This segment sells its products to original equipment manufacturers (OEMs) and distributors who serve the replacement markets in manufacturing, packaging, processing, transportation, construction, refrigeration and air conditioning, agricultural, and military machinery and equipment industries. The Aerospace Systems segment offers products for use in commercial and military airframe and engine programs, such as control actuation systems and components, engine build-up ducting, engine exhaust nozzles and assemblies, engine systems and components, fluid conveyance systems and components, fuel systems and components, fuel tank inerting systems, hydraulic systems and components, lubrication components, avionics, sensors, pneumatic control components, thermal management products, fire detection and suppression systems and components, and wheels and brakes, as well as fluid metering, delivery, and atomization devices. This segment markets its products directly to OEMs and end users. The company markets its products through direct-sales employees, independent distributors, and sales representatives. Parker-Hannifin Corporation was founded in 1917 and is headquartered in Cleveland, Ohio.

About Art’s-Way Manufacturing

Art’s-Way Manufacturing Co., Inc. manufactures and distributes farm equipment products. It operates through the Agricultural Products, and Modular Buildings segments. The Agricultural Products segment manufactures a variety of specialized farm machinery under its own label including portable and stationary animal feed processing equipment and related attachments used to mill and mix feed grains into custom animal feed rations, a line of forage equipment consisting of forage boxes, bale processors, running gear, and dump boxes, a line of manure spreaders, sugar beet harvesting equipment, and a line of dirt work equipment. The Modular Buildings segment produces and sells modular buildings, which are custom designed to meet the specific research needs of its customers. It also provides services relating to the design, manufacturing, delivery, installation and renting of the building units that it produces. The company was founded by Arthur Luscombe in 1956 and is headquartered in Armstrong, IA.