Wabco Holdings (NYSE: WBC) and Allison Transmission Holdings (NYSE:ALSN) are both mid-cap auto/tires/trucks companies, but which is the superior investment? We will compare the two businesses based on the strength of their institutional ownership, dividends, earnings, risk, valuation, profitability and analyst recommendations.

Institutional and Insider Ownership

97.5% of Wabco Holdings shares are held by institutional investors. 0.8% of Wabco Holdings shares are held by insiders. Comparatively, 7.9% of Allison Transmission Holdings 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.

Risk and Volatility

Wabco Holdings has a beta of 1.65, indicating that its stock price is 65% more volatile than the S&P 500. Comparatively, Allison Transmission Holdings has a beta of 1.18, indicating that its stock price is 18% more volatile than the S&P 500.

Profitability

This table compares Wabco Holdings and Allison Transmission Holdings’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Wabco Holdings 11.23% 40.21% 10.86%
Allison Transmission Holdings 14.32% 31.27% 6.77%

Earnings and Valuation

This table compares Wabco Holdings and Allison Transmission Holdings’ top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Wabco Holdings $2.93 billion 2.56 $479.40 million $6.00 23.28
Allison Transmission Holdings $1.98 billion 2.68 $707.40 million $1.78 20.02

Allison Transmission Holdings has higher revenue, but lower earnings than Wabco Holdings. Allison Transmission Holdings is trading at a lower price-to-earnings ratio than Wabco Holdings, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a breakdown of current ratings for Wabco Holdings and Allison Transmission Holdings, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Wabco Holdings 1 2 8 0 2.64
Allison Transmission Holdings 1 6 4 1 2.42

Wabco Holdings currently has a consensus target price of $139.11, indicating a potential downside of 0.40%. Allison Transmission Holdings has a consensus target price of $41.13, indicating a potential upside of 15.39%. Given Allison Transmission Holdings’ higher possible upside, analysts clearly believe Allison Transmission Holdings is more favorable than Wabco Holdings.

Dividends

Allison Transmission Holdings pays an annual dividend of $0.60 per share and has a dividend yield of 1.7%. Wabco Holdings does not pay a dividend. Allison Transmission Holdings pays out 33.7% of its earnings in the form of a dividend. Allison Transmission Holdings has raised its dividend for 4 consecutive years.

Summary

Wabco Holdings beats Allison Transmission Holdings on 10 of the 18 factors compared between the two stocks.

About Wabco Holdings

WABCO Holdings Inc. is a supplier of electronic, mechanical, electro-mechanical and aerodynamic products for various manufacturers of commercial trucks, buses and trailers, as well as passenger cars. The Company engineers, develops, manufactures and sells braking, stability, suspension and transmission automation and air management systems primarily for commercial vehicles. Its products are pneumatic anti-lock braking systems, electronic braking systems, electronic stability control systems, brake controls, automated manual transmission systems, air disc brakes, and a range of conventional mechanical products, such as actuators, air compressors and air control valves for medium- and heavy-duty trucks, buses and trailers. The Company’s products also include air compressor and air processing/air management system; electronic and conventional air suspension systems; transmission automation; roll stability support; advanced driver assistance systems, and fleet management solutions.

About Allison Transmission Holdings

Allison Transmission Holdings, Inc. and its subsidiaries design and manufacture commercial and defense fully-automatic transmissions. The Company manufactures fully-automatic transmissions for medium- and heavy-duty commercial vehicles, and medium-and heavy-tactical United States defense vehicles. The Company’s transmissions are used in a range of applications, including on-highway trucks (distribution, refuse, construction, fire and emergency), buses (primarily school, transit and hybrid-transit), motorhomes, off-highway vehicles and equipment (energy, mining and construction) and defense vehicles (wheeled and tracked). The Company’s transmissions are sold under the Allison Transmission brand name and remanufactured transmissions are sold under the ReTran brand name. The Company has developed over 100 different models that were used in more than 2,500 different vehicle configurations and were compatible with over 500 combinations of engines, as of December 31, 2016.

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