Analyzing Graham (NYSE:GHM) and Tennant (NYSE:TNC)

Graham (NYSE:GHM) and Tennant (NYSE:TNC) are both small-cap industrials companies, but which is the superior investment? We will contrast the two businesses based on the strength of their risk, analyst recommendations, profitability, institutional ownership, valuation, earnings and dividends.

Analyst Recommendations

This is a breakdown of recent ratings and price targets for Graham and Tennant, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Graham	0	3	3	0	2.50
Tennant	1	2	1	0	2.00

Graham presently has a consensus target price of $81.67, indicating a potential downside of 1.20%. Tennant has a consensus target price of $91.00, indicating a potential upside of 28.41%. Given Tennant’s higher possible upside, analysts clearly believe Tennant is more favorable than Graham.

Insider & Institutional Ownership

69.5% of Graham shares are held by institutional investors. Comparatively, 93.3% of Tennant shares are held by institutional investors. 6.0% of Graham shares are held by insiders. Comparatively, 2.6% of Tennant shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company is poised for long-term growth.

Volatility & Risk

Graham has a beta of 0.95, meaning that its share price is 5% less volatile than the S&P 500. Comparatively, Tennant has a beta of 0.98, meaning that its share price is 2% less volatile than the S&P 500.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Graham	6.28%	13.26%	6.07%
Tennant	3.64%	16.05%	8.19%

Earnings and Valuation

This table compares Graham and Tennant”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Graham	$209.90 million	4.36	$12.23 million	$1.35	61.23
Tennant	$1.20 billion	1.06	$43.80 million	$2.34	30.29

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

Summary

Tennant beats Graham on 8 of the 14 factors compared between the two stocks.

About Graham

Graham Corporation, together with its subsidiaries, designs and manufactures fluid, power, heat transfer, and vacuum equipment for chemical and petrochemical processing, defense, space, petroleum refining, cryogenic, energy, and other industries. It offers power plant systems, including ejectors and surface condensers; torpedo ejection, propulsion, and power systems, such as turbines, alternators, regulators, pumps, and blowers; and thermal management systems comprising pumps, blowers, and drive electronics for defense sector. The company also provides rocket propulsion systems consisting of turbopumps and fuel pumps; cooling systems, which include pumps, compressors, fans, and blowers; and life support systems that comprise fans, pumps, and blowers for space industry. In addition, it offers heat transfer and vacuum systems, including ejectors, process and surface condensers, liquid ring pumps, heat exchangers, and nozzles; power generation systems, such as turbines, generators, compressors, and pumps; and thermal management systems comprising pumps, blowers, and electronics for energy sector. Further, the company offers heat transfer and vacuum systems consisting of ejectors, process and surface condensers, liquid ring pumps, heat exchangers, and nozzles for chemical and petrochemical processing industry. The company also services and sells spare parts for its equipment. It sells its products directly in the United States, the Middle East, Canada, Asia, South America, and internationally. Graham Corporation was founded in 1936 and is headquartered in Batavia, New York.

About Tennant

Tennant Company, together with its subsidiaries, designs, manufactures, and markets floor cleaning equipment in the Americas, Europe, the Middle East, Africa, and the Asia Pacific. The company offers a suite of products, including floor maintenance and cleaning equipment, detergent-free and other sustainable cleaning technologies, aftermarket parts and consumables, equipment maintenance and repair services, and asset management solutions. It provides business solutions, such as financing, rental, and leasing programs, as well as machine-to-machine asset management solutions. The company offers its products under the Tennant, Nobles, Alfa Uma Empresa Tennant, IPC, Gaomei, and Rongen brands, as well as private-label brands. Its products are used in retail establishments and distribution centers; factories and warehouses; and public venues, such as arenas and stadiums, office buildings, schools and universities, hospitals and clinics, and other environments. The company markets its products to contract cleaners and businesses through direct sales and service organizations, as well as through a network of authorized distributors. Tennant Company was founded in 1870 and is headquartered in Eden Prairie, Minnesota.