Analyzing Ryerson (NYSE:RYZ) and Watsco (NYSE:WSO)

Ryerson (NYSE:RYZ) and Watsco (NYSE:WSO) are both industrials companies, but which is the superior business? We will contrast the two companies based on the strength of their dividends, profitability, risk, valuation, institutional ownership, analyst recommendations and earnings.

Insider & Institutional Ownership

94.8% of Ryerson shares are held by institutional investors. Comparatively, 89.7% of Watsco shares are held by institutional investors. 6.6% of Ryerson shares are held by company insiders. Comparatively, 12.9% of Watsco shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Valuation and Earnings

This table compares Ryerson and Watsco”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Ryerson	$4.57 billion	0.33	-$56.40 million	($1.24)	-23.45
Watsco	$7.28 billion	1.74	$496.99 million	$11.53	26.98

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

Risk & Volatility

Ryerson has a beta of 1.65, suggesting that its stock price is 65% more volatile than the S&P 500. Comparatively, Watsco has a beta of 1.05, suggesting that its stock price is 5% more volatile than the S&P 500.

Analyst Ratings

This is a summary of current recommendations and price targets for Ryerson and Watsco, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Ryerson	2	1	0	0	1.33
Watsco	0	9	2	0	2.18

Watsco has a consensus target price of $395.50, indicating a potential upside of 27.14%. Given Watsco’s stronger consensus rating and higher possible upside, analysts plainly believe Watsco is more favorable than Ryerson.

Dividends

Ryerson pays an annual dividend of $0.75 per share and has a dividend yield of 2.6%. Watsco pays an annual dividend of $13.20 per share and has a dividend yield of 4.2%. Ryerson pays out -60.5% of its earnings in the form of a dividend. Watsco pays out 114.5% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Watsco has increased its dividend for 13 consecutive years. Watsco is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

This table compares Ryerson and Watsco’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Ryerson	-0.56%	-0.62%	-0.21%
Watsco	6.53%	14.40%	10.17%

Summary

Watsco beats Ryerson on 14 of the 17 factors compared between the two stocks.

About Ryerson

Ryerson Holding Corporation, together with its subsidiaries, processes and distributes industrial metals in the United States, Canada, Mexico, and China. It offers a line of products in carbon steel, stainless steel, alloy steels, and aluminum, as well as nickel and red metals in various shapes and forms, including coils, sheets, rounds, hexagons, square and flat bars, plates, structural, and tubing. The company also provides various processing services, such as bending, beveling, blanking, blasting, burning, cutting-to-length, drilling, embossing, flattening, forming, grinding, laser cutting, machining, notching, painting, perforating, polishing, punching, rolling, sawing, scribing, shearing, slitting, stamping, tapping, threading, welding, or other techniques to process materials. It serves various industries, including commercial ground transportation, metal fabrication and machine shops, industrial machinery and equipment manufacturing, consumer durable equipment, HVAC manufacturing, construction equipment manufacturing, food processing and agricultural equipment manufacturing, and oil and gas. The company was founded in 1842 and is headquartered in Chicago, Illinois.

About Watsco

Watsco, Inc., together with its subsidiaries, engages in the distribution of air conditioning, heating, refrigeration equipment, and related parts and supplies in the United States and internationally. The company distributes equipment, including residential ducted and ductless air conditioners, such as gas, electric, and oil furnaces; commercial air conditioning and heating equipment systems; and other specialized equipment. It also offers parts comprising replacement compressors, evaporator coils, motors, and other component parts; and supplies, such as thermostats, insulation materials, refrigerants, ductworks, grills, registers, sheet metals, tools, copper tubing, concrete pads, tapes, adhesives, and other ancillary supplies, as well as plumbing and bathroom remodeling supplies. The company serves contractors and dealers that service the replacement and new construction markets for residential and light commercial central air conditioning, heating, and refrigeration systems. Watsco, Inc. was incorporated in 1956 and is headquartered in Miami, Florida.