Critical Contrast: Federal Signal (FSS) & Subaru (FUJHY)

Federal Signal (NYSE: FSS) and Subaru (OTCMKTS:FUJHY) are both multi-sector conglomerates companies, but which is the superior business? We will contrast the two companies based on the strength of their dividends, profitability, earnings, analyst recommendations, institutional ownership, risk and valuation.

Dividends

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Federal Signal pays an annual dividend of $0.28 per share and has a dividend yield of 1.2%. Subaru pays an annual dividend of $0.25 per share and has a dividend yield of 1.5%. Federal Signal pays out 32.9% of its earnings in the form of a dividend. Subaru pays out 15.7% 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. Subaru is clearly the better dividend stock, given its higher yield and lower payout ratio.

Analyst Ratings

This is a summary of recent recommendations for Federal Signal and Subaru, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Federal Signal 0 1 2 0 2.67
Subaru 0 0 0 0 N/A

Federal Signal currently has a consensus target price of $20.00, suggesting a potential downside of 10.99%. Given Federal Signal’s higher possible upside, research analysts plainly believe Federal Signal is more favorable than Subaru.

Profitability

This table compares Federal Signal and Subaru’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Federal Signal 6.86% 12.07% 5.62%
Subaru 5.91% 19.61% 10.45%

Volatility and Risk

Federal Signal has a beta of 1.14, indicating that its share price is 14% more volatile than the S&P 500. Comparatively, Subaru has a beta of 0.38, indicating that its share price is 62% less volatile than the S&P 500.

Earnings and Valuation

This table compares Federal Signal and Subaru’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Federal Signal $898.50 million 1.50 $61.60 million $0.85 26.44
Subaru $29.24 billion 0.87 $2.63 billion $1.59 10.49

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

Insider and Institutional Ownership

87.6% of Federal Signal shares are owned by institutional investors. Comparatively, 0.1% of Subaru shares are owned by institutional investors. 4.3% of Federal Signal shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Summary

Federal Signal beats Subaru on 8 of the 15 factors compared between the two stocks.

About Federal Signal

Federal Signal Corporation, together with its subsidiaries, designs, manufactures, and supplies a suite of products and integrated solutions for municipal, governmental, industrial, and commercial customers in the United States, Canada, Europe, and internationally. It operates through two segments, Environmental Solutions Group and Safety and Security Systems Group. The Environmental Solutions Group segment offers a range of street sweeper vehicles, sewer cleaner and vacuum loader trucks, hydro-excavation trucks, and water blasting equipment under the Elgin, Vactor, Guzzler, Westech, and Jetstream brand names. Is also manufactures dump truck bodies and trailers for maintenance and infrastructure end-markets under the Ox Bodies, Crysteel, J-Craft, Duraclass, Rugby, and Travis brand names. In addition, this segment engages in the sale of parts, service and repair, equipment rental, and training activities under the FS Solutions brand. The Safety and Security Systems Group segment provides systems and products for campus and community alerting, emergency vehicles, first responder interoperable communications, and industrial communications, as well as command and municipal networked security. Its products include vehicle lightbars and sirens, public warning sirens, general alarm systems, public address systems, and public safety software. This segment sells its products under the Federal Signal, Federal Signal VAMA, and Victor brand names. The company sells its products through wholesaler, distributor, independent manufacturer representative, original equipment manufacturer, and direct sales force, as well as independent foreign distributor. Federal Signal Corporation was founded in 1901 and is headquartered in Oak Brook, Illinois.

About Subaru

SUBARU CORPORATION, formerly Fuji Heavy Industries Ltd., is a manufacturer of Subaru automobiles. The Company’s segments include Automobiles, Aerospace, Industrial products and Other. The Automobile segment manufactures and sells vehicles and related products. The Aerospace segment manufactures aircrafts, parts of space-related devices. The Industrial products segment manufactures and sells Robin engines and related products. The Other segment consists of garbage collection vehicles, specialized vehicles and real estate lease. It offers a platform, called the Subaru Global Platform, which is a Subaru technology for unifying development of all of its models under a single platform design. It manufactures, repairs and sells airplanes aerospace-related machinery and their components. It also manufactures, sells and repairs generators, engine-equipped machinery, agricultural machinery, construction machinery other machine tools and their components.

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