Financial Contrast: Flowserve (NYSE:FLS) and Illinois Tool Works (NYSE:ITW)

Illinois Tool Works (NYSE:ITW) and Flowserve (NYSE:FLS) are both industrials companies, but which is the superior stock? We will compare the two businesses based on the strength of their profitability, institutional ownership, risk, valuation, analyst recommendations, dividends and earnings.

Profitability

This table compares Illinois Tool Works and Flowserve’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Illinois Tool Works	19.11%	95.16%	19.22%
Flowserve	7.32%	21.19%	8.39%

Valuation and Earnings

This table compares Illinois Tool Works and Flowserve”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Illinois Tool Works	$16.04 billion	4.67	$3.07 billion	$10.49	24.80
Flowserve	$4.73 billion	1.98	$346.25 million	$2.62	28.06

Illinois Tool Works has higher revenue and earnings than Flowserve. Illinois Tool Works is trading at a lower price-to-earnings ratio than Flowserve, indicating that it is currently the more affordable of the two stocks.

Institutional and Insider Ownership

79.8% of Illinois Tool Works shares are held by institutional investors. Comparatively, 93.9% of Flowserve shares are held by institutional investors. 0.9% of Illinois Tool Works shares are held by insiders. Comparatively, 0.7% of Flowserve shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.

Analyst Recommendations

This is a breakdown of recent recommendations for Illinois Tool Works and Flowserve, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Illinois Tool Works	5	7	2	0	1.79
Flowserve	0	3	8	1	2.83

Illinois Tool Works currently has a consensus price target of $275.69, suggesting a potential upside of 5.96%. Flowserve has a consensus price target of $89.30, suggesting a potential upside of 21.48%. Given Flowserve’s stronger consensus rating and higher possible upside, analysts clearly believe Flowserve is more favorable than Illinois Tool Works.

Dividends

Illinois Tool Works pays an annual dividend of $6.44 per share and has a dividend yield of 2.5%. Flowserve pays an annual dividend of $0.88 per share and has a dividend yield of 1.2%. Illinois Tool Works pays out 61.4% of its earnings in the form of a dividend. Flowserve pays out 33.6% 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. Illinois Tool Works has increased its dividend for 55 consecutive years and Flowserve has increased its dividend for 1 consecutive years. Illinois Tool Works is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Volatility and Risk

Illinois Tool Works has a beta of 1.13, suggesting that its stock price is 13% more volatile than the S&P 500. Comparatively, Flowserve has a beta of 1.27, suggesting that its stock price is 27% more volatile than the S&P 500.

Summary

Illinois Tool Works beats Flowserve on 10 of the 18 factors compared between the two stocks.

About Illinois Tool Works

Illinois Tool Works Inc. manufactures and sells industrial products and equipment in the United States and internationally. It operates through seven segments: Automotive OEM; Food Equipment; Test & Measurement and Electronics; Welding; Polymers & Fluids; Construction Products; and Specialty Products. The Automotive OEM segment offers plastic and metal components, fasteners, and assemblies for automobiles, light trucks, and other industrial uses. The Food Equipment segment provides warewashing, refrigeration, cooking, and food processing equipment; kitchen exhaust, ventilation, and pollution control systems; and food equipment maintenance and repair services. The Test & Measurement and Electronics segment produces and sells equipment, consumables, and related software for testing and measuring of materials and structures, as well as equipment and consumables used in the production of electronic subassemblies and microelectronics. The Welding segment produces arc welding equipment; and metal arc welding consumables and related accessories. The Polymers & Fluids segment produces adhesives, sealants, lubrication and cutting fluids, and fluids and polymers for auto aftermarket maintenance and appearance. The Construction Products segment offers engineered fastening systems and solutions for the residential construction, renovation/remodel, and commercial construction markets. The Specialty Products segment provides beverage packaging equipment and consumables, product coding and marking equipment and consumables, and appliance components and fasteners. It serves the automotive OEM and tiers, MRO, commercial food equipment, construction, general industrial, industrial capital goods, consumer durables, automotive aftermarket end, and other markets. The company distributes its products directly to industrial manufacturers, as well as through independent distributors. Illinois Tool Works Inc. was founded in 1912 and is based in Glenview, Illinois.

About Flowserve

Flowserve Corporation designs, manufactures, distributes, and services industrial flow management equipment in the United States, Canada, Mexico, Europe, the Middle East, Africa, and the Asia Pacific. It operates through Flowserve Pump Division (FPD) and Flow Control Division (FCD) segments. The FPD segment offers custom and pre-configured pumps and pump systems, mechanical seals, auxiliary systems, replacement parts, upgrades, and related aftermarket services; and equipment services, including installation and commissioning services, seal systems spare parts, repairs, advanced diagnostics, re-rate and upgrade solutions, retrofit programs, and machining and asset management solutions, as well as manufactures a gas-lubricated mechanical seal for use in high-speed compressors for gas pipelines and in the oil and gas production and process markets. The FCD segment provides engineered and industrial valve and automation systems, including isolation and control valves, actuation, controls, and related equipment; and equipment maintenance services for flow control systems, including advanced diagnostics, repair, installation, commissioning, retrofit programs, and field machining capabilities. This segment's products are used to control, direct, and manage the flow of liquids, gases, and multi-phase fluids. It primarily serves oil and gas, chemical and pharmaceuticals, power generation, and water management markets, as well as general industries, including mining and ore processing, pulp and paper, food and beverage, and other smaller applications. The company distributes its products through direct sales, distributors, and sales representatives. Flowserve Corporation was founded in 1790 and is headquartered in Irving, Texas.