3M (NYSE:MMM) & Federal Signal (NYSE:FSS) Head-To-Head Review

3M (NYSE:MMM) and Federal Signal (NYSE:FSS) are both multi-sector conglomerates companies, but which is the superior stock? We will compare the two companies based on the strength of their profitability, valuation, earnings, analyst recommendations, dividends, institutional ownership and risk.

Institutional and Insider Ownership

65.2% of 3M shares are owned by institutional investors. Comparatively, 92.7% of Federal Signal shares are owned by institutional investors. 0.2% of 3M shares are owned by insiders. Comparatively, 3.3% of Federal Signal shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company is poised for long-term growth.

Volatility and Risk

3M has a beta of 1.03, meaning that its stock price is 3% more volatile than the S&P 500. Comparatively, Federal Signal has a beta of 1.26, meaning that its stock price is 26% more volatile than the S&P 500.

Analyst Ratings

This is a summary of recent ratings for 3M and Federal Signal, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
3M	2	6	6	0	2.29
Federal Signal	0	1	4	1	3.00

3M presently has a consensus price target of $170.00, suggesting a potential upside of 6.09%. Federal Signal has a consensus price target of $139.25, suggesting a potential upside of 8.09%. Given Federal Signal’s stronger consensus rating and higher possible upside, analysts clearly believe Federal Signal is more favorable than 3M.

Dividends

3M pays an annual dividend of $3.12 per share and has a dividend yield of 1.9%. Federal Signal pays an annual dividend of $0.60 per share and has a dividend yield of 0.5%. 3M pays out 60.1% of its earnings in the form of a dividend. Federal Signal pays out 13.6% 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. 3M has increased its dividend for 1 consecutive years and Federal Signal has increased its dividend for 3 consecutive years.

Earnings & Valuation

This table compares 3M and Federal Signal”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
3M	$25.02 billion	3.34	$3.25 billion	$5.19	30.88
Federal Signal	$2.18 billion	3.60	$246.60 million	$4.40	29.28

3M has higher revenue and earnings than Federal Signal. Federal Signal is trading at a lower price-to-earnings ratio than 3M, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares 3M and Federal Signal’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
3M	11.14%	104.75%	12.03%
Federal Signal	11.56%	21.18%	13.14%

Summary

Federal Signal beats 3M on 11 of the 18 factors compared between the two stocks.

About 3M

3M Company provides diversified technology services in the United States and internationally. The company’s Safety and Industrial segment offers industrial abrasives and finishing for metalworking applications; autobody repair solutions; closure systems for personal hygiene products, masking, and packaging materials; electrical products and materials for construction and maintenance, power distribution, and electrical original equipment manufacturers; structural adhesives and tapes; respiratory, hearing, eye, and fall protection solutions; and natural and color-coated mineral granules for shingles. Its Transportation and Electronics segment provides ceramic solutions; attachment/bonding products, films, sound, and temperature management for transportation vehicles; premium large format graphic films for advertising and fleet signage; light management films and electronics assembly solutions; packaging and interconnection solutions; semiconductor production materials; data centers solutions; and reflective signage for highway, and vehicle safety. The company’s Consumer segment provides consumer bandages, braces, supports, and consumer respirators; home cleaning products; retail abrasives, paint accessories, car care DIY products, picture hanging, and consumer air quality solutions; and stationery products. It offers its products through e-commerce and traditional wholesalers, retailers, jobbers, distributors, and dealers. 3M Company was founded in 1902 and is headquartered in Saint Paul, Minnesota.

About Federal Signal

Federal Signal Corp. engages in the design and manufacture of products and integrated solutions for municipal, governmental, industrial, and commercial customers. It operates through the Environmental Solutions Group and Safety and Security Systems Group segments. The Environment Solutions Group segment is involved in the manufacture and supply of street sweeper vehicles, sewer cleaners, vacuum loader trucks, hydro-excavation trucks, and water blasting equipment. The Safety and Security Systems Group segment offers comprehensive systems and products that law enforcement, fire rescue, emergency medical services, campuses, military facilities, and industrial sites use to protect people and property. The company was founded in 1901 and is headquartered in Oak Brook, IL.