Analyzing Advanced Drainage Systems (NYSE:WMS) and Allegion (NYSE:ALLE)

Allegion (NYSE:ALLE) and Advanced Drainage Systems (NYSE:WMS) are both industrials companies, but which is the superior investment? We will compare the two companies based on the strength of their dividends, valuation, earnings, institutional ownership, analyst recommendations, risk and profitability.

Dividends

Allegion pays an annual dividend of $2.20 per share and has a dividend yield of 1.1%. Advanced Drainage Systems pays an annual dividend of $0.80 per share and has a dividend yield of 0.6%. Allegion pays out 27.4% of its earnings in the form of a dividend. Advanced Drainage Systems pays out 15.2% 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. Allegion has raised its dividend for 11 consecutive years and Advanced Drainage Systems has raised its dividend for 1 consecutive years. Allegion is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Recommendations

This is a summary of recent recommendations for Allegion and Advanced Drainage Systems, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Allegion	0	4	5	0	2.56
Advanced Drainage Systems	0	2	8	0	2.80

Allegion currently has a consensus price target of $180.70, indicating a potential downside of 5.62%. Advanced Drainage Systems has a consensus price target of $184.40, indicating a potential upside of 44.09%. Given Advanced Drainage Systems’ stronger consensus rating and higher possible upside, analysts plainly believe Advanced Drainage Systems is more favorable than Allegion.

Volatility & Risk

Allegion has a beta of 0.82, meaning that its share price is 18% less volatile than the S&P 500. Comparatively, Advanced Drainage Systems has a beta of 1.3, meaning that its share price is 30% more volatile than the S&P 500.

Valuation and Earnings

This table compares Allegion and Advanced Drainage Systems”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Allegion	$4.07 billion	3.97	$643.80 million	$8.03	23.84
Advanced Drainage Systems	$3.26 billion	2.90	$426.46 million	$5.26	24.33

Allegion has higher revenue and earnings than Advanced Drainage Systems. Allegion 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.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Allegion	15.74%	35.52%	14.06%
Advanced Drainage Systems	12.44%	27.88%	11.76%

Institutional & Insider Ownership

92.2% of Allegion shares are held by institutional investors. Comparatively, 89.8% of Advanced Drainage Systems shares are held by institutional investors. 0.6% of Allegion shares are held by insiders. Comparatively, 1.7% of Advanced Drainage Systems shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Summary

Allegion beats Advanced Drainage Systems on 10 of the 17 factors compared between the two stocks.

About Allegion

Allegion plc is a global provider of security products and solutions for homes, businesses, schools, hospitals and other institutions. Its offerings include mechanical and electronic locks, access-control systems, door closers, exit devices and related door hardware. The company sells products under brands including Schlage, Von Duprin, LCN and CISA. Its solutions are used in both commercial and residential settings, with operations serving customers in North America and other markets around the world.

About Advanced Drainage Systems

Advanced Drainage Systems, Inc. (NYSE: WMS) manufactures water-management products for infrastructure, construction, agriculture and residential markets. Its offerings include thermoplastic corrugated pipe and related products used to manage stormwater, drainage and wastewater. The company also provides stormwater storage, treatment and infiltration systems, as well as products for onsite wastewater and septic systems through its Infiltrator Water Technologies business. Its portfolio includes solutions for projects ranging from roadways and commercial developments to residential wastewater applications.