Head to Head Review: PACCAR (PCAR) vs. Federal Signal Corporation (FSS)
PACCAR (NASDAQ: PCAR) and Federal Signal Corporation (NYSE:FSS) are both auto/tires/trucks companies, but which is the superior investment? We will compare the two businesses based on the strength of their dividends, analyst recommendations, earnings, institutional ownership, valuation, profitability and risk.
Risk & Volatility
PACCAR has a beta of 1.15, suggesting that its stock price is 15% more volatile than the S&P 500. Comparatively, Federal Signal Corporation has a beta of 1.36, suggesting that its stock price is 36% more volatile than the S&P 500.
Earnings and Valuation
This table compares PACCAR and Federal Signal Corporation’s gross revenue, earnings per share and valuation.
|Gross Revenue||Price/Sales Ratio||EBITDA||Earnings Per Share||Price/Earnings Ratio|
|PACCAR||$17.26 billion||1.41||$2.36 billion||$3.74||18.48|
|Federal Signal Corporation||$765.00 million||1.50||$84.40 million||$0.66||28.91|
PACCAR has higher revenue and earnings than Federal Signal Corporation. PACCAR is trading at a lower price-to-earnings ratio than Federal Signal Corporation, indicating that it is currently the more affordable of the two stocks.
This table compares PACCAR and Federal Signal Corporation’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
|Federal Signal Corporation||5.20%||10.59%||5.78%|
PACCAR pays an annual dividend of $1.00 per share and has a dividend yield of 1.4%. Federal Signal Corporation pays an annual dividend of $0.28 per share and has a dividend yield of 1.5%. PACCAR pays out 26.7% of its earnings in the form of a dividend. Federal Signal Corporation pays out 42.4% 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. Federal Signal Corporation has increased its dividend for 2 consecutive years. Federal Signal Corporation is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.
Insider and Institutional Ownership
62.7% of PACCAR shares are held by institutional investors. Comparatively, 83.7% of Federal Signal Corporation shares are held by institutional investors. 2.6% of PACCAR shares are held by company insiders. Comparatively, 4.2% of Federal Signal Corporation shares are held by company 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.
This is a breakdown of current recommendations and price targets for PACCAR and Federal Signal Corporation, as reported by MarketBeat.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
|Federal Signal Corporation||0||0||2||0||3.00|
PACCAR currently has a consensus target price of $71.75, indicating a potential upside of 3.80%. Federal Signal Corporation has a consensus target price of $20.00, indicating a potential upside of 4.82%. Given Federal Signal Corporation’s stronger consensus rating and higher probable upside, analysts clearly believe Federal Signal Corporation is more favorable than PACCAR.
Federal Signal Corporation beats PACCAR on 9 of the 17 factors compared between the two stocks.
PACCAR Inc (PACCAR) is a technology company. The Company’s segments include Truck, Parts and Financial Services. The Truck segment includes the design, manufacture and distribution of light-, medium- and heavy-duty commercial trucks. The Company’s trucks are marketed under the Kenworth, Peterbilt and DAF nameplates. It also manufactures engines, primarily for use in the Company’s trucks, at its facilities in Columbus, Mississippi; Eindhoven, the Netherlands, and Ponta Grossa, Brazil. The Parts segment includes the distribution of aftermarket parts for trucks and related commercial vehicles. The Financial Services segment includes finance and leasing products and services provided to customers and dealers. Its Other business includes the manufacturing and marketing of industrial winches. The Company operates in Australia and Brazil and sells trucks and parts to customers in Asia, Africa, Middle East and South America.
About Federal Signal Corporation
Federal Signal Corporation designs, manufactures and supplies a suite of products and integrated solutions for municipal, governmental, industrial and commercial customers. The Company’s segments include the Environmental Solutions Group and the Safety and Security Systems Group. Its Environmental Solutions Group manufactures and supplies a range of street sweeper vehicles, sewer cleaner and vacuum loader trucks, hydro-excavation trucks and waterblasting equipment. The products are sold to both municipal and industrial customers under the Elgin, Vactor, Guzzler and Jetstream brand names. Safety and Security Systems is a manufacturer and supplier of systems and products that law enforcement, fire rescue, emergency medical services, campuses military facilities and industrial sites use to protect people and property. It offers systems for campus and community alerting, emergency vehicles, first responder interoperable communications and industrial communications, among others.
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