Critical Analysis: Kawasaki Heavy Industries (OTCMKTS:KWHIY) vs. Pentair (NYSE:PNR)

Pentair (NYSE:PNR) and Kawasaki Heavy Industries (OTCMKTS:KWHIY) are both large-cap industrials companies, but which is the better business? We will contrast the two companies based on the strength of their institutional ownership, dividends, profitability, earnings, analyst recommendations, risk and valuation.

Analyst Recommendations

This is a summary of current recommendations and price targets for Pentair and Kawasaki Heavy Industries, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Pentair	2	7	7	1	2.41
Kawasaki Heavy Industries	0	3	0	0	2.00

Pentair presently has a consensus target price of $76.59, suggesting a potential upside of 9.26%. Given Pentair’s stronger consensus rating and higher probable upside, research analysts clearly believe Pentair is more favorable than Kawasaki Heavy Industries.

Volatility and Risk

Pentair has a beta of 1.01, indicating that its stock price is 1% more volatile than the S&P 500. Comparatively, Kawasaki Heavy Industries has a beta of 0.95, indicating that its stock price is 5% less volatile than the S&P 500.

Dividends

Pentair pays an annual dividend of $1.08 per share and has a dividend yield of 1.5%. Kawasaki Heavy Industries pays an annual dividend of $0.06 per share and has a dividend yield of 1.1%. Pentair pays out 28.6% of its earnings in the form of a dividend. Kawasaki Heavy Industries pays out 23.1% 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. Pentair has raised its dividend for 7 consecutive years. Pentair is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Insider & Institutional Ownership

92.4% of Pentair shares are owned by institutional investors. 1.3% of Pentair shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock will outperform the market over the long term.

Earnings & Valuation

This table compares Pentair and Kawasaki Heavy Industries”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Pentair	$4.18 billion	2.68	$653.80 million	$3.77	18.59
Kawasaki Heavy Industries	$15.35 billion	0.77	$713.84 million	$0.26	20.72

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

Profitability

This table compares Pentair and Kawasaki Heavy Industries’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Pentair	15.44%	20.10%	11.25%
Kawasaki Heavy Industries	N/A	N/A	N/A

Summary

Pentair beats Kawasaki Heavy Industries on 15 of the 18 factors compared between the two stocks.

About Pentair

Pentair plc provides various water solutions in the United States, Western Europe, China, Eastern Europe, Latin America, the Middle East, Southeast Asia, Australia, Canada, and Japan. The company operates through three segments: Flow, Water Solutions, and Pool. The Flow segment designs, manufactures, and sells fluid treatment and pump products and systems, including pressure vessels, gas recovery solutions, membrane bioreactors, wastewater reuse systems and advanced membrane filtration, separation systems, water disposal pumps, water supply pumps, fluid transfer pumps, turbine pumps, solid handling pumps, and agricultural spray nozzles for fluid delivery, ion exchange, desalination, food and beverage, separation technologies in the oil and gas industry, residential and municipal wells, water treatment, wastewater solids handling, pressure boosting, circulation and transfer, fire suppression, flood control, agricultural irrigation, and crop spray in residential, commercial, and industrial markets. The Water Solutions segment provides commercial and residential water treatment products and systems, including pressure tanks, control valves, activated carbon products, commercial ice machines, conventional filtration products, and point-of-entry and point-of-use water treatment systems, as well as installation and preventative services for use in residential whole home water filtration, drinking water filtration, and water softening solutions, as well as commercial total water management and filtration in foodservice operations. The Pool segment provides residential and commercial pool equipment and accessories comprising pumps, filters, heaters, lights, automatic controls, automatic cleaners, maintenance equipment, and pool accessories for applications in residential and commercial pool maintenance, pool repair, renovation, service, and construction and aquaculture solutions. Pentair plc was founded in 1966 and is headquartered in London, the United Kingdom.

About Kawasaki Heavy Industries

Kawasaki Heavy Industries, Ltd. engages in aerospace systems, energy solution and marine engineering, precision machinery and robot, rolling stock, and motorcycle and engine businesses in Japan and internationally. It manufactures aircraft for the Japan ministry of defense; helicopters; and helicopter and jet engines for commercial aircrafts. The company also manufactures railway cars; a range of rolling stocks, including Shinkansen, electric cars, passenger coaches, freight cars, locomotives, diesel locomotives, and transit systems. In addition, it engages in the production and sale of energy-related machinery and systems, marine machinery and systems, industrial equipment, and environmental equipment. Further, the company manufactures and supplies motorcycles, off-road four wheelers, watercrafts, general-purpose gasoline engines, etc. Additionally, it manufactures and sells pumps, motors, valves, and various hydraulic machinery, as well as assembles hydraulic systems; and industrial robots for use in welding, assembly, handling, painting, and palletization for various industries, including automotive and electronics industries. The company was founded in 1878 and is headquartered in Tokyo, Japan.