Analyzing BorgWarner (NYSE:BWA) & Garrett Motion (NASDAQ:GTX)

Garrett Motion (NASDAQ:GTX) and BorgWarner (NYSE:BWA) are both consumer discretionary companies, but which is the better stock? We will contrast the two companies based on the strength of their analyst recommendations, valuation, institutional ownership, risk, earnings, dividends and profitability.

Valuation and Earnings

This table compares Garrett Motion and BorgWarner”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Garrett Motion	$3.58 billion	1.00	$310.00 million	$1.95	9.93
BorgWarner	$14.32 billion	0.67	$277.00 million	$2.35	20.21

Garrett Motion has higher earnings, but lower revenue than BorgWarner. Garrett Motion is trading at a lower price-to-earnings ratio than BorgWarner, indicating that it is currently the more affordable of the two stocks.

Insider and Institutional Ownership

86.3% of Garrett Motion shares are owned by institutional investors. Comparatively, 95.7% of BorgWarner shares are owned by institutional investors. 1.1% of Garrett Motion shares are owned by company insiders. Comparatively, 0.8% of BorgWarner shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Dividends

Garrett Motion pays an annual dividend of $0.32 per share and has a dividend yield of 1.7%. BorgWarner pays an annual dividend of $0.68 per share and has a dividend yield of 1.4%. Garrett Motion pays out 16.4% of its earnings in the form of a dividend. BorgWarner pays out 28.9% 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. BorgWarner has increased its dividend for 1 consecutive years. Garrett Motion is clearly the better dividend stock, given its higher yield and lower payout ratio.

Profitability

This table compares Garrett Motion and BorgWarner’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Garrett Motion	9.97%	-52.43%	15.48%
BorgWarner	3.36%	19.61%	8.24%

Analyst Ratings

This is a summary of current ratings and recommmendations for Garrett Motion and BorgWarner, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Garrett Motion	0	2	6	0	2.75
BorgWarner	0	3	11	0	2.79

Garrett Motion presently has a consensus price target of $37.00, indicating a potential upside of 91.12%. BorgWarner has a consensus price target of $79.00, indicating a potential upside of 66.33%. Given Garrett Motion’s higher possible upside, equities research analysts plainly believe Garrett Motion is more favorable than BorgWarner.

Risk & Volatility

Garrett Motion has a beta of 0.95, suggesting that its stock price is 5% less volatile than the S&P 500. Comparatively, BorgWarner has a beta of 1.2, suggesting that its stock price is 20% more volatile than the S&P 500.

Summary

BorgWarner beats Garrett Motion on 9 of the 17 factors compared between the two stocks.

About Garrett Motion

Garrett Motion Inc., together with its subsidiaries, designs, manufactures, and sells turbocharging, air and fluid compression, and high-speed electric motor technologies for original equipment manufacturers and distributors worldwide. The company offers cutting-edge technology for the mobility and industrial space, including light vehicles, commercial vehicles, and industrial applications. In addition, it provides mechanical and electrical products for turbocharging and boosting internal combustion engines, as well as compressing air for fuel cell compressors, and compressing refrigerant for electric cooling compressors. The company offers its products in the aftermarket through distributors. Garrett Motion Inc. was incorporated in 2018 and is based in Rolle, Switzerland.

About BorgWarner

BorgWarner Inc., together with its subsidiaries, provides solutions for combustion, hybrid, and electric vehicles worldwide. It offers turbochargers, eBoosters, eTurbos, timing systems, emissions systems, thermal systems, gasoline ignition technology, smart remote actuators, powertrain sensors, cabin heaters, battery modules and systems, battery heaters, and battery charging. The company provides power electronics, control modules, software, friction, and mechanical products for automatic transmissions and torque-management products. It sells its products to original equipment manufacturers of light vehicles, which comprise passenger cars, sport-utility vehicles, vans, and light trucks; commercial vehicles, including medium-duty and heavy-duty trucks, and buses; and off-highway vehicles, such as agricultural and construction machinery, and marine applications, as well as to tier one vehicle systems suppliers and the aftermarket for light, commercial, and off-highway vehicles. The company was formerly known as Borg-Warner Automotive, Inc. BorgWarner Inc. was incorporated in 1987 and is headquartered in Auburn Hills, Michigan.