Watsco (NYSE:WSO.B) & Applied Industrial Technologies (NYSE:AIT) Critical Comparison

Applied Industrial Technologies (NYSE:AIT) and Watsco (NYSE:WSO.B) are both large-cap industrials companies, but which is the superior investment? We will compare the two businesses based on the strength of their dividends, analyst recommendations, valuation, institutional ownership, earnings, profitability and risk.

Valuation and Earnings

This table compares Applied Industrial Technologies and Watsco”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Applied Industrial Technologies	$4.97 billion	2.48	$414.52 million	$10.96	30.65
Watsco	$7.24 billion	1.72	$496.99 million	$11.53	26.16

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

Profitability

This table compares Applied Industrial Technologies and Watsco’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Applied Industrial Technologies	8.35%	22.17%	13.43%
Watsco	6.53%	14.40%	10.17%

Analyst Ratings

This is a breakdown of current ratings and price targets for Applied Industrial Technologies and Watsco, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Applied Industrial Technologies	0	0	7	0	3.00
Watsco	0	0	0	0	0.00

Applied Industrial Technologies presently has a consensus price target of $400.00, suggesting a potential upside of 19.09%. Given Applied Industrial Technologies’ stronger consensus rating and higher possible upside, analysts clearly believe Applied Industrial Technologies is more favorable than Watsco.

Institutional and Insider Ownership

93.5% of Applied Industrial Technologies shares are held by institutional investors. Comparatively, 0.1% of Watsco shares are held by institutional investors. 1.6% of Applied Industrial Technologies shares are held by insiders. Comparatively, 13.8% of Watsco shares are held 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.

Dividends

Applied Industrial Technologies pays an annual dividend of $2.04 per share and has a dividend yield of 0.6%. Watsco pays an annual dividend of $13.20 per share and has a dividend yield of 4.4%. Applied Industrial Technologies pays out 18.6% 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. Applied Industrial Technologies has raised its dividend for 16 consecutive years.

Risk & Volatility

Applied Industrial Technologies has a beta of 0.84, indicating that its stock price is 16% less volatile than the S&P 500. Comparatively, Watsco has a beta of 0.66, indicating that its stock price is 34% less volatile than the S&P 500.

Summary

Applied Industrial Technologies beats Watsco on 12 of the 17 factors compared between the two stocks.

About Applied Industrial Technologies

Applied Industrial Technologies, Inc. distributes industrial motion, power, control, and automation technology solutions in North America, Australia, New Zealand, and Singapore. It operates in two segments, Service Center Based Distribution, and Engineered Solutions. The company distributes bearings, power transmission products, engineered fluid power components and systems, specialty flow control solutions, advanced automation products, industrial rubber products, linear motion components, automation solutions, tools, safety products, oilfield supplies, and other industrial and maintenance supplies; and motors, belting, drives, couplings, pumps, hydraulic and pneumatic components, filtration supplies, valves, fittings, process instrumentation, actuators, and hoses, filtration supplies, as well as other related supplies for general operational needs of customers' machinery and equipment. It also operates fabricated rubber shops and service field crews that install, modify, and repair conveyor belts and rubber linings, as well as offer hose assemblies. In addition, the company provides technical support services; engages in the distribution of fluid power and industrial flow control products; advanced automation solutions, including machine vision, robotics, motion control, and smart technologies. It distributes industrial products through a network of service centers. The company serves various industries, including agriculture and food processing, cement, chemicals and petrochemicals, fabricated metals, forest products, industrial machinery and equipment, life sciences, mining, oil and gas, primary metals, technology, transportation, and utilities, as well as government entities. The company was formerly known as Bearings, Inc. and changed its to name to Applied Industrial Technologies, Inc. in 1997. The company was founded in 1923 and is headquartered in Cleveland, Ohio.

About Watsco

Watsco, Inc., together with its subsidiaries, distributes air conditioning, heating, and refrigeration equipment; and related parts and supplies in the United States, Canada, Mexico, and Puerto Rico. It offers residential ducted and ductless air conditioners; gas, electric, and oil furnaces; commercial air conditioning and heating equipment systems; and other specialized equipment. The company also provides parts comprising replacement compressors, evaporator coils, motors, and other component parts; and supplies, such as thermostats, insulation material, refrigerants, ductwork, grills, registers, sheet metal, tools, copper tubing, concrete pads, tapes, adhesives, and other ancillary supplies. It serves contractors and dealers that service the replacement and new construction markets for residential and light commercial central air conditioning, heating, and refrigeration systems. In addition, the company exports its products to Latin America and the Caribbean Basin. Watsco, Inc. was founded in 1945 and is headquartered in Miami, Florida.