Sun Hydraulics Corporation (NASDAQ: SNHY) and Watts Water Technologies (NYSE:WTS) are both industrial products companies, but which is the better stock? We will contrast the two companies based on the strength of their dividends, institutional ownership, valuation, analyst recommendations, risk, earnings and profitabiliy.

Profitability

This table compares Sun Hydraulics Corporation and Watts Water Technologies’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Sun Hydraulics Corporation 11.14% 10.57% 7.17%
Watts Water Technologies 6.40% 12.75% 5.42%

Dividends

Sun Hydraulics Corporation pays an annual dividend of $0.36 per share and has a dividend yield of 0.9%. Watts Water Technologies pays an annual dividend of $0.76 per share and has a dividend yield of 1.1%. Sun Hydraulics Corporation pays out 37.9% of its earnings in the form of a dividend. Watts Water Technologies pays out 29.2% 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. Sun Hydraulics Corporation has increased its dividend for 4 consecutive years. Watts Water Technologies is clearly the better dividend stock, given its higher yield and lower payout ratio.

Analyst Recommendations

This is a summary of recent ratings for Sun Hydraulics Corporation and Watts Water Technologies, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Sun Hydraulics Corporation 0 0 1 0 3.00
Watts Water Technologies 0 3 0 0 2.00

Sun Hydraulics Corporation presently has a consensus target price of $35.00, suggesting a potential downside of 16.43%. Watts Water Technologies has a consensus target price of $64.50, suggesting a potential downside of 3.23%. Given Watts Water Technologies’ higher probable upside, analysts plainly believe Watts Water Technologies is more favorable than Sun Hydraulics Corporation.

Institutional & Insider Ownership

80.6% of Sun Hydraulics Corporation shares are owned by institutional investors. Comparatively, 77.7% of Watts Water Technologies shares are owned by institutional investors. 10.7% of Sun Hydraulics Corporation shares are owned by insiders. Comparatively, 1.1% of Watts Water Technologies shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.

Volatility and Risk

Sun Hydraulics Corporation has a beta of 1.81, meaning that its stock price is 81% more volatile than the S&P 500. Comparatively, Watts Water Technologies has a beta of 1.07, meaning that its stock price is 7% more volatile than the S&P 500.

Valuation and Earnings

This table compares Sun Hydraulics Corporation and Watts Water Technologies’ gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Sun Hydraulics Corporation $227.26 million 4.98 $55.55 million $0.95 44.08
Watts Water Technologies $1.40 billion 1.63 $196.00 million $2.60 25.63

Watts Water Technologies has higher revenue and earnings than Sun Hydraulics Corporation. Watts Water Technologies is trading at a lower price-to-earnings ratio than Sun Hydraulics Corporation, indicating that it is currently the more affordable of the two stocks.

Summary

Sun Hydraulics Corporation beats Watts Water Technologies on 10 of the 17 factors compared between the two stocks.

Sun Hydraulics Corporation Company Profile

Sun Hydraulics Corporation (Sun) develops and manufactures solutions for the hydraulics and electronics markets. It is engaged in power controls and vehicle technologies lines of business. The Company operates through two segments including hydraulics and electronics. Hydraulics market segment is engaged in manufacturing of screw-in hydraulic cartridge valves, electro-hydraulics, manifolds, and integrated package solutions for the worldwide industrial and mobile hydraulics markets operating under the brand Sun Hydraulics. Electronics market segment provides electronic control, display and instrumentation solutions for both recreational and off-highway vehicles, as well as stationary and power generation equipment and that offered under the brands of Enovation Controls, Murphy and Zero Off.

Watts Water Technologies Company Profile

Watts Water Technologies, Inc. is a supplier of products and solutions that manage and conserve the flow of fluids and energy into, through and out of buildings in the residential and commercial markets. The Company, through its subsidiary, Watts Regulator Co., is engaged in manufacturing products and systems focused on the control, conservation and quality of water, and safety of the people using it. Its segments include Americas, Middle East and Africa and Asia-Pacific. It four product lines include: residential and commercial flow control products, which include products for plumbing and hot water applications; heating, ventilation and air conditioning and gas products, which include boilers, water heaters and heating solutions; drainage and water re-use products, which include drainage products and engineered rain water harvesting solutions, and water quality products, which include point-of-use and point-of-entry water filtration, conditioning and scale prevention systems.

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