Analyzing Kadant (KAI) and Pentair (PNR)

Pentair (NYSE: PNR) and Kadant (NYSE:KAI) are both industrial products companies, but which is the superior stock? We will contrast the two businesses based on the strength of their valuation, earnings, institutional ownership, profitability, risk, dividends and analyst recommendations.

Valuation & Earnings

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This table compares Pentair and Kadant’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Pentair $4.94 billion 2.51 $666.50 million $3.53 19.29
Kadant $515.03 million 2.01 $31.09 million $4.49 20.91

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

Analyst Recommendations

This is a summary of current ratings and recommmendations for Pentair and Kadant, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Pentair 4 7 3 0 1.93
Kadant 0 1 2 0 2.67

Pentair currently has a consensus target price of $71.27, suggesting a potential upside of 4.69%. Kadant has a consensus target price of $106.00, suggesting a potential upside of 12.89%. Given Kadant’s stronger consensus rating and higher possible upside, analysts clearly believe Kadant is more favorable than Pentair.

Insider & Institutional Ownership

86.6% of Pentair shares are owned by institutional investors. Comparatively, 90.7% of Kadant shares are owned by institutional investors. 9.9% of Pentair shares are owned by company insiders. Comparatively, 5.6% of Kadant shares are owned 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.

Profitability

This table compares Pentair and Kadant’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Pentair 13.50% 13.41% 6.86%
Kadant 6.04% 15.93% 7.92%

Dividends

Pentair pays an annual dividend of $1.40 per share and has a dividend yield of 2.1%. Kadant pays an annual dividend of $0.84 per share and has a dividend yield of 0.9%. Pentair pays out 39.7% of its earnings in the form of a dividend. Kadant pays out 18.7% 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. Pentair has raised its dividend for 41 consecutive years and Kadant has raised its dividend for 4 consecutive years. Pentair is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Volatility & Risk

Pentair has a beta of 1.37, suggesting that its share price is 37% more volatile than the S&P 500. Comparatively, Kadant has a beta of 1.37, suggesting that its share price is 37% more volatile than the S&P 500.

Pentair Company Profile

Pentair plc operates as a diversified industrial manufacturing company in the United States, Europe, and internationally. The company operates through two segments, Water and Electrical. The Water segment designs, manufactures, and services products and solutions to meet filtration, separation, flow, and water management challenges in agriculture, aquaculture, foodservice, food and beverage processing, swimming pools, water supply and disposal, and various industrial applications. This segment serves wholesalers and retail distributors, end-users, engineering procurement contractors, and original equipment manufacturers under the Aurora, Berkeley, Codeline, Everpure, Fairbanks-Nijhuis, Kreepy Krauly, Haffmans, Hydromatic, Hypro, Pentair, Pentair Aquatic Eco-Systems, Sta-Rite, Shurflo, Südmo, and X-Flow brand names. The Electrical segment designs, manufactures, and services products that protect sensitive equipment and buildings; thermal management systems; and engineered fastening solutions. This segment serves commercial, communications, energy, electronics, infrastructure, medical, security, and defense industries under the CADDY, ERICO, Hoffman, LENTON, Raychem, Schroff, and Tracer brands. Pentair plc was founded in 1966 and is based in London, the United Kingdom.

Kadant Company Profile

Kadant Inc. supplies equipment and critical components used in papermaking, paper recycling, recycling and waste management, and other process industries worldwide. The company operates in two segments, Papermaking Systems and Wood Processing Systems. The Papermaking Systems segment develops, manufactures, and markets custom-engineered stock-preparation systems and equipment for the preparation of wastepaper for conversion into recycled paper and balers, as well as related equipment used in the processing of recyclable and waste materials; and fluid-handling systems and equipment used in industrial piping systems to compensate for movement, as well as to transfer fluid, power, and data. This segment also offers doctoring systems and equipment, and related consumables to enhance the operation of paper machines and other industrial processes; and filtration and cleaning systems for draining, purifying, and recycling process water, as well as cleaning fabrics, belts, and rolls in various process industries. The Wood Processing Systems segment develops, manufactures, and markets stranders, debarkers, chippers, and logging machinery used in the harvesting and production of lumber and oriented strand board, an engineered wood panel product used primarily in home construction. This segment also provides pulping equipment refurbishment and repair services for the pulp and paper industry. The company also manufactures and sells granules for use in turf and ornamental applications, and oil and grease absorption, as well as carriers for agricultural, home lawn and garden, and professional lawn applications. The company was formerly known as Thermo Fibertek Inc. and changed its name to Kadant Inc. in July 2001. Kadant Inc. was founded in 1991 and is headquartered in Westford, Massachusetts.

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