Critical Review: AECOM (NYSE:ACM) & Shimizu (OTCMKTS:SHMUY)

Shimizu (OTCMKTS:SHMUY) and AECOM (NYSE:ACM) are both industrials companies, but which is the better business? We will contrast the two companies based on the strength of their dividends, risk, valuation, earnings, institutional ownership, analyst recommendations and profitability.

Analyst Recommendations

This is a breakdown of recent ratings and target prices for Shimizu and AECOM, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Shimizu	0	0	0	0	0.00
AECOM	0	4	9	0	2.69

AECOM has a consensus price target of $114.82, suggesting a potential upside of 51.26%. Given AECOM’s stronger consensus rating and higher probable upside, analysts clearly believe AECOM is more favorable than Shimizu.

Dividends

Shimizu pays an annual dividend of $1.82 per share and has a dividend yield of 2.9%. AECOM pays an annual dividend of $1.24 per share and has a dividend yield of 1.6%. Shimizu pays out 28.0% of its earnings in the form of a dividend. AECOM pays out 32.4% 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. AECOM has increased its dividend for 3 consecutive years. Shimizu is clearly the better dividend stock, given its higher yield and lower payout ratio.

Earnings and Valuation

This table compares Shimizu and AECOM”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Shimizu	$13.67 billion	0.77	$835.68 million	$6.49	9.56
AECOM	$16.14 billion	0.60	$561.77 million	$3.83	19.82

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

Insider and Institutional Ownership

85.4% of AECOM shares are owned by institutional investors. 0.5% of AECOM shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company will outperform the market over the long term.

Profitability

This table compares Shimizu and AECOM’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Shimizu	8.11%	9.08%	3.37%
AECOM	3.16%	28.52%	6.08%

Volatility and Risk

Shimizu has a beta of 0.02, meaning that its share price is 98% less volatile than the S&P 500. Comparatively, AECOM has a beta of 0.93, meaning that its share price is 7% less volatile than the S&P 500.

Summary

AECOM beats Shimizu on 11 of the 17 factors compared between the two stocks.

About Shimizu

Shimizu Corporation, together with its subsidiaries, engages in the construction, development, engineering, and life cycle valuation businesses in Japan and internationally. The company proposes, plans, designs, builds, repairs, manages, operates, and maintains offices, plants, schools, hospitals, and other buildings, such as nursing homes, rehabilitation centers, temples, shrines, and architectures; offers design, build, and renovation for tunnels, bridges, dams, urban infrastructure, energy facilities, and other public works; provides construction for manufacturing facilities, high-rise buildings, hospitals, bridges, subways, and other projects; and develops and rents real estate properties, including condominiums, data centers, office buildings, logistics facilities, and other properties. It also offers engineering, procurement, and construction services in solar and wind power projects, environmental clean-up engineering, turn-key order fulfillment of plants, and ICT systems and engineering projects. In addition, the company provides facility operation and management services; infrastructure management, maintenance, and concession services; and generates power using renewable energy and sells electricity, as well as involved in commercialization of smart cities and provision of services using ICT technology. Further, it engages in the lease and sale of construction equipment and materials; provision of interior finishing and rebar works; insurance agency, security, and travel agency services; supply of PCR test kits; and rental of various tower cranes, crawler cranes, and other construction machinery and equipment. Additionally, the company offers construction equipment consulting services, such as construction planning, maintenance, and management services; property and building management services; and real estate consulting and brokerage services, as well as tenant leasing services. Shimizu Corporation was founded in 1804 and is headquartered in Tokyo, Japan.

About AECOM

AECOM, together with its subsidiaries, provides professional infrastructure consulting services worldwide. It operates in three segments: Americas, International, and AECOM Capital. The company offers planning, consulting, architectural and engineering design, construction and program management, and investment and development services to public and private clients. It is also involved in the investment and development of real estate projects. In addition, the company provides construction services, including building construction and energy, and infrastructure and industrial construction. It serves transportation, water, government, facilities, environmental, and energy sectors. The company was formerly known as AECOM Technology Corporation and changed its name to AECOM in January 2015. AECOM was incorporated in 1980 and is headquartered in Dallas, Texas.