Head-To-Head Comparison: Rush Enterprises (NASDAQ:RUSHA) and Watsco (NYSE:WSO)

Rush Enterprises (NASDAQ:RUSHA) and Watsco (NYSE:WSO) are both industrials companies, but which is the superior investment? We will contrast the two companies based on the strength of their risk, earnings, valuation, analyst recommendations, institutional ownership, profitability and dividends.

Volatility & Risk

Rush Enterprises has a beta of 0.88, indicating that its share price is 12% less volatile than the S&P 500. Comparatively, Watsco has a beta of 1.05, indicating that its share price is 5% more volatile than the S&P 500.

Profitability

This table compares Rush Enterprises and Watsco’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Rush Enterprises	3.67%	11.65%	5.84%
Watsco	6.53%	14.40%	10.17%

Institutional & Insider Ownership

84.4% of Rush Enterprises shares are held by institutional investors. Comparatively, 89.7% of Watsco shares are held by institutional investors. 12.7% of Rush Enterprises shares are held by company insiders. Comparatively, 12.9% of Watsco shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Dividends

Rush Enterprises pays an annual dividend of $0.56 per share and has a dividend yield of 1.1%. Watsco pays an annual dividend of $13.20 per share and has a dividend yield of 4.2%. Rush Enterprises pays out 25.3% of its earnings in the form of a dividend. Watsco pays out 114.5% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Rush Enterprises has increased its dividend for 6 consecutive years and Watsco has increased its dividend for 13 consecutive years. Watsco is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Earnings & Valuation

This table compares Rush Enterprises and Watsco”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Rush Enterprises	$7.43 billion	0.77	$263.78 million	$2.21	22.14
Watsco	$7.24 billion	1.78	$496.99 million	$11.53	27.07

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

Analyst Ratings

This is a summary of current recommendations and price targets for Rush Enterprises and Watsco, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Rush Enterprises	1	1	3	0	2.40
Watsco	0	9	2	0	2.18

Rush Enterprises presently has a consensus target price of $46.00, indicating a potential downside of 5.97%. Watsco has a consensus target price of $395.50, indicating a potential upside of 26.69%. Given Watsco’s higher probable upside, analysts clearly believe Watsco is more favorable than Rush Enterprises.

Summary

Watsco beats Rush Enterprises on 13 of the 17 factors compared between the two stocks.

About Rush Enterprises

Rush Enterprises, Inc., through its subsidiaries, operates as an integrated retailer of commercial vehicles and related services in the United States and Canada. The company operates a network of commercial vehicle dealerships under the Rush Truck Centers name. Its Rush Truck Centers primarily sell commercial vehicles manufactured by Peterbilt, International, Hino, Ford, Isuzu, IC Bus, Blue Bird, and Dennis Eagle. The company also offers new and used commercial vehicles, and aftermarket parts, as well as service and repair, financing, and leasing and rental services; and offers property and casualty insurance, including collision and liability insurance on commercial vehicles, cargo insurance, and credit life insurance products. In addition, it provides equipment installation and repair, parts installation, and paint and body repair services; new vehicle pre-delivery inspection, truck modification, and natural gas fuel system installation services, body, chassis upfitting, and component installation services; and vehicle telematics products, as well as sells new and used trailers, and tires for use on commercial vehicles. The company serves regional and national fleets, corporations, local and state governments, and owner-operators. It operates a network of centers located in the states of Alabama, Arizona, Arkansas, California, Colorado, Florida, Georgia, Idaho, Illinois, Indiana, Kansas, Kentucky, Missouri, Nevada, New Mexico, North Carolina, Ohio, Oklahoma, Pennsylvania, Tennessee, Texas, Utah, Virginia, and Ontario. Rush Enterprises, Inc. was incorporated in 1965 and is headquartered in New Braunfels, Texas.

About Watsco

Watsco, Inc., together with its subsidiaries, engages in the distribution of air conditioning, heating, refrigeration equipment, and related parts and supplies in the United States and internationally. The company distributes equipment, including residential ducted and ductless air conditioners, such as gas, electric, and oil furnaces; commercial air conditioning and heating equipment systems; and other specialized equipment. It also offers parts comprising replacement compressors, evaporator coils, motors, and other component parts; and supplies, such as thermostats, insulation materials, refrigerants, ductworks, grills, registers, sheet metals, tools, copper tubing, concrete pads, tapes, adhesives, and other ancillary supplies, as well as plumbing and bathroom remodeling supplies. The company serves contractors and dealers that service the replacement and new construction markets for residential and light commercial central air conditioning, heating, and refrigeration systems. Watsco, Inc. was incorporated in 1956 and is headquartered in Miami, Florida.