Eaton (NYSE: ETN) and Power Solutions International (OTCMKTS:PSIX) are both industrial products companies, but which is the better investment? We will compare the two companies based on the strength of their valuation, institutional ownership, profitability, earnings, dividends, risk and analyst recommendations.

Insider & Institutional Ownership

76.7% of Eaton shares are owned by institutional investors. Comparatively, 5.8% of Power Solutions International shares are owned by institutional investors. 0.8% of Eaton shares are owned by insiders. Comparatively, 56.5% of Power Solutions International shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Profitability

This table compares Eaton and Power Solutions International’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Eaton 14.21% 12.89% 6.43%
Power Solutions International N/A N/A N/A

Dividends

Eaton pays an annual dividend of $2.40 per share and has a dividend yield of 3.1%. Power Solutions International does not pay a dividend. Eaton pays out 37.7% of its earnings in the form of a dividend. Eaton has increased its dividend for 7 consecutive years.

Analyst Recommendations

This is a breakdown of recent recommendations and price targets for Eaton and Power Solutions International, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Eaton 3 11 5 0 2.11
Power Solutions International 0 3 1 0 2.25

Eaton currently has a consensus target price of $82.75, indicating a potential upside of 7.11%. Power Solutions International has a consensus target price of $13.50, indicating a potential upside of 90.14%. Given Power Solutions International’s stronger consensus rating and higher probable upside, analysts clearly believe Power Solutions International is more favorable than Eaton.

Volatility and Risk

Eaton has a beta of 1.38, indicating that its share price is 38% more volatile than the S&P 500. Comparatively, Power Solutions International has a beta of 2.77, indicating that its share price is 177% more volatile than the S&P 500.

Valuation & Earnings

This table compares Eaton and Power Solutions International’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Eaton $19.75 billion 1.72 $1.92 billion $6.37 12.13
Power Solutions International $389.45 million 0.25 $14.27 million N/A N/A

Eaton has higher revenue and earnings than Power Solutions International.

Summary

Eaton beats Power Solutions International on 10 of the 15 factors compared between the two stocks.

Eaton Company Profile

Eaton Corporation (Eaton) is a diversified power management company. It is engaged in the manufacturing of electrical components and systems for power quality, distribution and control; hydraulics components, systems and services for industrial and mobile equipment; aerospace fuel, hydraulics and pneumatic systems for commercial and military use, and truck and automotive drivetrain and powertrain systems for performance, fuel economy and safety. On January 1, 2011, it closed the acquisition of the Tuthill Coupling Group, which is a division of the Tuthill Corporation. It has five segments: Electrical Americas and Electrical Rest of World; Hydraulics; Aerospace; Truck, and Automotive. On October 1, 2010, it acquired CopperLogic, Inc. On July 15, 2010, it acquired EMC Engineers, Inc. In May 2011, it acquired Internormen Technology Group. In August 2011, it acquired IE Power, Inc. In December 2011, it acquired E.A. Pedersen Company.

Power Solutions International Company Profile

Power Solutions International, Inc. is a producer and distributor of a range of low-emission power systems that run on non-diesel fuels, such as natural gas, propane and gasoline. The Company’s industrial power systems are used by original equipment manufacturers (OEMs) in a range of industries with a diversified set of applications, including stationary electricity generators, oil and gas equipment, forklifts, aerial work platforms, industrial sweepers, arbor equipment, agricultural and turf equipment, aircraft ground support equipment, construction and irrigation equipment, and other industrial equipment. The Company provides alternative fuel power systems for OEMs of off-highway industrial equipment and on-road medium trucks and busses. In addition to its emission-certified power systems, the Company produces and distributes non-emission-certified power systems for industrial OEMs for particular applications in markets without emission standards.

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