G&K Services (NASDAQ: GK) and H&E Equipment Services (NASDAQ:HEES) are both industrials companies, but which is the superior investment? We will contrast the two businesses based on the strength of their profitability, institutional ownership, valuation, earnings, dividends, risk and analyst recommendations.

Institutional and Insider Ownership

88.6% of G&K Services shares are held by institutional investors. Comparatively, 75.4% of H&E Equipment Services shares are held by institutional investors. 3.7% of G&K Services shares are held by insiders. Comparatively, 12.3% of H&E Equipment Services shares are held 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.

Analyst Recommendations

This is a breakdown of recent ratings and recommmendations for G&K Services and H&E Equipment Services, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
G&K Services 0 0 0 0 N/A
H&E Equipment Services 0 0 3 0 3.00

H&E Equipment Services has a consensus price target of $34.00, suggesting a potential downside of 16.30%. Given H&E Equipment Services’ higher possible upside, analysts plainly believe H&E Equipment Services is more favorable than G&K Services.

Dividends

G&K Services pays an annual dividend of $1.56 per share and has a dividend yield of 1.6%. H&E Equipment Services pays an annual dividend of $1.10 per share and has a dividend yield of 2.7%. G&K Services pays out 54.7% of its earnings in the form of a dividend. H&E Equipment Services pays out 107.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Valuation and Earnings

This table compares G&K Services and H&E Equipment Services’ gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
G&K Services N/A N/A N/A $2.85 34.21
H&E Equipment Services $978.14 million 1.48 $37.17 million $1.02 39.82

H&E Equipment Services has higher revenue and earnings than G&K Services. G&K Services is trading at a lower price-to-earnings ratio than H&E Equipment Services, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares G&K Services and H&E Equipment Services’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
G&K Services 3.79% 9.12% 4.03%
H&E Equipment Services 3.69% 38.83% 4.30%

Summary

H&E Equipment Services beats G&K Services on 8 of the 12 factors compared between the two stocks.

G&K Services Company Profile

G&K Services, Inc. is a service-focused provider of branded uniform and facility services programs. The Company provides a range of workwear and protective safety apparel through rental and direct purchase programs. The Company also supplies various facility products and services, including floor mats, towels, mops, restroom hygiene products, and first aid supplies. It also manufactures certain work apparel garments that are used to support its garment rental and direct purchase programs. It operates in two segments: United States (includes the Dominican Republic) and Canada. The Company operated from approximately 160 locations, as of July 2, 2016. The Company serves a diverse base of customer locations in various industries, including automotive, warehousing, distribution, transportation, energy, manufacturing, food processing, retail, restaurants, construction and trades, hospitality, government, healthcare and others.

H&E Equipment Services Company Profile

H&E Equipment Services, Inc. is an integrated equipment services company. The Company is focused on heavy construction and industrial equipment. As of December 31, 2016, the Company rented, sold and provided parts and services support for four core categories of specialized equipment: hi-lift or aerial work platform equipment; cranes; earthmoving equipment, and industrial lift trucks. The Company’s principal business activities include equipment rentals; new equipment sales; used equipment sales; parts sales, and repair and maintenance services. As of February 16, 2017, the Company had 78 facilities located throughout the West Coast, Intermountain, Southwest, Gulf Coast, Southeast and Mid-Atlantic regions of the United States. The Company rents its heavy construction and industrial equipment to its customers on a daily, weekly and monthly basis. The Company sells new heavy construction and industrial equipment. The Company is a distributor of Grove and Manitowoc crane equipment.

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