Analyzing Lennox International (NYSE:LII) and Advanced Drainage Systems (NYSE:WMS)

Advanced Drainage Systems (NYSE:WMS) and Lennox International (NYSE:LII) are both large-cap industrials companies, but which is the superior business? We will contrast the two businesses based on the strength of their institutional ownership, analyst recommendations, profitability, valuation, earnings, dividends and risk.

Dividends

Advanced Drainage Systems pays an annual dividend of $0.80 per share and has a dividend yield of 0.6%. Lennox International pays an annual dividend of $5.44 per share and has a dividend yield of 1.2%. Advanced Drainage Systems pays out 14.7% of its earnings in the form of a dividend. Lennox International pays out 24.6% 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. Advanced Drainage Systems has raised its dividend for 1 consecutive years and Lennox International has raised its dividend for 16 consecutive years. Lennox International is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Valuation & Earnings

This table compares Advanced Drainage Systems and Lennox International”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Advanced Drainage Systems	$3.05 billion	3.65	$426.46 million	$5.44	26.69
Lennox International	$5.20 billion	2.90	$805.80 million	$22.12	19.68

Lennox International has higher revenue and earnings than Advanced Drainage Systems. Lennox International is trading at a lower price-to-earnings ratio than Advanced Drainage Systems, indicating that it is currently the more affordable of the two stocks.

Analyst Ratings

This is a summary of current ratings and target prices for Advanced Drainage Systems and Lennox International, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Advanced Drainage Systems	0	2	7	0	2.78
Lennox International	2	9	5	0	2.19

Advanced Drainage Systems currently has a consensus price target of $187.00, indicating a potential upside of 28.79%. Lennox International has a consensus price target of $546.58, indicating a potential upside of 25.54%. Given Advanced Drainage Systems’ stronger consensus rating and higher possible upside, research analysts plainly believe Advanced Drainage Systems is more favorable than Lennox International.

Institutional and Insider Ownership

89.8% of Advanced Drainage Systems shares are owned by institutional investors. Comparatively, 67.1% of Lennox International shares are owned by institutional investors. 1.7% of Advanced Drainage Systems shares are owned by insiders. Comparatively, 9.8% of Lennox International shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock will outperform the market over the long term.

Risk and Volatility

Advanced Drainage Systems has a beta of 1.27, suggesting that its share price is 27% more volatile than the S&P 500. Comparatively, Lennox International has a beta of 1.19, suggesting that its share price is 19% more volatile than the S&P 500.

Profitability

This table compares Advanced Drainage Systems and Lennox International’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Advanced Drainage Systems	13.98%	26.63%	11.80%
Lennox International	14.61%	66.42%	19.16%

Summary

Lennox International beats Advanced Drainage Systems on 9 of the 17 factors compared between the two stocks.

About Advanced Drainage Systems

Advanced Drainage Systems, Inc. designs, manufactures, and markets thermoplastic corrugated pipes and related water management products in North America and internationally. The company operates through Pipe, International, Infiltrator, and Allied Products & Other segments. It offers single, double, and triple wall corrugated polypropylene and polyethylene pipes; plastic leachfield chambers and systems; EZflow synthetic aggregate bundles; wastewater purification through mechanical aeration wastewater for residential and commercial systems; septic tanks and accessories; combined treatment and dispersal systems, including advanced enviro-septic and advanced treatment leachfield systems; and allied products, including storm retention/detention and septic chambers, polyvinyl chloride drainage structures, fittings, and water quality filters and separators. The company also purchases and distributes construction fabrics and other geosynthetic products for soil stabilization, reinforcement, filtration, separation, erosion control, and sub-surface drainage, as well as drainage grates and other products. In addition, it provides PVC hubs, rubber sleeves, and stainless-steel bands. The company offers its products for non-residential, residential, agriculture, and infrastructure applications through a network of distribution centers. Advanced Drainage Systems, Inc. incorporated in 1966 and is headquartered in Hilliard, Ohio.

About Lennox International

Lennox International Inc., together with its subsidiaries, designs, manufactures, and markets a range of products for the heating, ventilation, air conditioning, and refrigeration markets in the United States, Canada, and internationally. The Home Comfort Solutions segment provides furnaces, air conditioners, heat pumps, packaged heating and cooling systems, indoor air quality equipment, comfort control products, and replacement parts and supplies; residential heating, ventilation, cooling equipment, and air conditioning; and evaporator coils and unit heaters under Lennox, Dave Lennox Signature Collection, Armstrong Air, Ducane, AirEase, Concord, MagicPak, Advanced Distributor Products, Allied, Elite Series, Merit Series, Comfort Sync, Healthy Climate, iComfort, ComfortSense, and Lennox Stores name. The Building Climate Solutions segment offers unitary heating and air conditioning equipment, applied systems, controls, installation and service of commercial heating and cooling equipment, variable refrigerant flow commercial, curb, curb adapters, drop box diffusers, HVAC recycling, and salvage service. This segment also provides condensing units, unit coolers, fluid coolers, air cooled condensers, air handlers, and refrigeration rack systems for preserving food and other perishables; and compressor racks and industrial process chillers under the Lennox, Model L, CORE, Enlight, Xion, Energence, Prodigy, Strategos, Raider, Lennox VRF, Lennox National Account Services, Allied Commercial, Elite, AES Industries, Mechanical, and Reclaim, Heatcraft Worldwide and Chandler Refrigeration, Bohn, MAGNA, Larkin, FriguaBohn, IntelliGen, and Interlink brand name. In addition, the company provides small package units, rooftop units, chillers, air handlers, and fan coils. It sells its products and services through direct sales, distributors, and company-owned parts and supplies stores. The company was founded in 1895 and is headquartered in Richardson, Texas.