Federal Signal (NYSE:FSS) and Alamo Group (NYSE:ALG) Head to Head Survey

Alamo Group (NYSE:ALG) and Federal Signal (NYSE:FSS) are both industrials companies, but which is the superior stock? We will contrast the two companies based on the strength of their dividends, earnings, valuation, risk, profitability, institutional ownership and analyst recommendations.

Valuation & Earnings

This table compares Alamo Group and Federal Signal”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Alamo Group	$1.60 billion	1.01	$103.80 million	$6.41	20.88
Federal Signal	$2.18 billion	3.17	$246.60 million	$4.82	23.48

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

Dividends

Alamo Group pays an annual dividend of $1.36 per share and has a dividend yield of 1.0%. Federal Signal pays an annual dividend of $0.60 per share and has a dividend yield of 0.5%. Alamo Group pays out 21.2% of its earnings in the form of a dividend. Federal Signal pays out 12.4% 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. Alamo Group has raised its dividend for 14 consecutive years and Federal Signal has raised its dividend for 3 consecutive years. Alamo Group is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

This table compares Alamo Group and Federal Signal’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Alamo Group	4.72%	9.43%	6.56%
Federal Signal	11.65%	21.31%	12.91%

Volatility & Risk

Alamo Group has a beta of 1.08, suggesting that its stock price is 8% more volatile than the S&P 500. Comparatively, Federal Signal has a beta of 1.22, suggesting that its stock price is 22% more volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of recent recommendations and price targets for Alamo Group and Federal Signal, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Alamo Group	1	2	1	1	2.40
Federal Signal	0	2	4	0	2.67

Alamo Group presently has a consensus price target of $188.00, suggesting a potential upside of 40.50%. Federal Signal has a consensus price target of $135.25, suggesting a potential upside of 19.53%. Given Alamo Group’s higher probable upside, research analysts plainly believe Alamo Group is more favorable than Federal Signal.

Institutional & Insider Ownership

92.4% of Alamo Group shares are held by institutional investors. Comparatively, 92.7% of Federal Signal shares are held by institutional investors. 1.1% of Alamo Group shares are held by insiders. Comparatively, 3.3% of Federal Signal shares are held by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Summary

Federal Signal beats Alamo Group on 13 of the 18 factors compared between the two stocks.

About Alamo Group

Alamo Group Inc. designs, manufactures, distributes, and services vegetation management and infrastructure maintenance equipment for governmental, industrial, and agricultural uses worldwide. It operates through two segments, Vegetation Management and Industrial Equipment. Its Vegetation Management Division segment offers hydraulically-powered and tractor – and off-road chassis mounted mowers, other cutters and replacement parts for heavy-duty and intensive uses and heavy duty, tractor- and truck-mounted mowing and vegetation maintenance equipment, and replacement parts. This segment also provides rotary and finishing mowers, flail and disc mowers, front-end loaders, backhoes, rotary tillers, posthole diggers, scraper blades and replacement parts, zero turn radius mowers, cutting parts, plain and hard-faced replacement tillage tools, disc blades, and fertilizer application components; aftermarket agricultural parts, heavy-duty mechanical rotary mowers, snow blowers, rock removal equipment, tractor attachments, agricultural implements, hydraulic and boom-mounted hedge and grass cutters, hedgerow cutters, industrial grass mowers, agricultural seedbed preparation cultivators, self-propelled sprayers and multi-drive load-carrying vehicles, and cutting blades. The company's Industrial Equipment Division segment offers truck-mounted air vacuum, mechanical broom, and regenerative air sweepers, pothole patchers, leaf collection equipment and replacement brooms, parking lot and street sweepers, excavators, catch basin cleaners, and roadway debris vacuum systems, as well as truck-mounted vacuum machines, combination sewer cleaners, and hydro excavators. This segment also offers ice control products, snowplows and heavy duty snow removal equipment, hitches, attachments, and graders; and public works and runway maintenance products, parts, and services, and high pressure cleaning systems and trenchers. The company was founded in 1955 and is headquartered in Seguin, Texas.

About Federal Signal

Federal Signal Corp. engages in the design and manufacture of products and integrated solutions for municipal, governmental, industrial, and commercial customers. It operates through the Environmental Solutions Group and Safety and Security Systems Group segments. The Environment Solutions Group segment is involved in the manufacture and supply of street sweeper vehicles, sewer cleaners, vacuum loader trucks, hydro-excavation trucks, and water blasting equipment. The Safety and Security Systems Group segment offers comprehensive systems and products that law enforcement, fire rescue, emergency medical services, campuses, military facilities, and industrial sites use to protect people and property. The company was founded in 1901 and is headquartered in Oak Brook, IL.