Analyzing AZZ (AZZ) and LSI Industries (LYTS)

AZZ (NYSE: AZZ) and LSI Industries (NASDAQ:LYTS) are both small-cap industrial products companies, but which is the better investment? We will contrast the two companies based on the strength of their dividends, valuation, profitability, institutional ownership, risk, analyst recommendations and earnings.

Analyst Recommendations

This is a breakdown of current ratings for AZZ and LSI Industries, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
AZZ 0 1 0 0 2.00
LSI Industries 0 1 2 0 2.67

AZZ presently has a consensus target price of $52.00, indicating a potential upside of 13.91%. LSI Industries has a consensus target price of $9.27, indicating a potential upside of 21.13%. Given LSI Industries’ stronger consensus rating and higher probable upside, analysts clearly believe LSI Industries is more favorable than AZZ.

Insider & Institutional Ownership

92.6% of AZZ shares are held by institutional investors. Comparatively, 73.6% of LSI Industries shares are held by institutional investors. 0.0% of AZZ shares are held by insiders. Comparatively, 6.4% of LSI Industries shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Risk and Volatility

AZZ has a beta of 1.24, meaning that its stock price is 24% more volatile than the S&P 500. Comparatively, LSI Industries has a beta of 1.67, meaning that its stock price is 67% more volatile than the S&P 500.

Earnings and Valuation

This table compares AZZ and LSI Industries’ top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
AZZ $858.93 million 1.38 $60.92 million $2.50 18.26
LSI Industries $331.39 million 0.59 $3.00 million $0.19 40.26

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

Dividends

AZZ pays an annual dividend of $0.68 per share and has a dividend yield of 1.5%. LSI Industries pays an annual dividend of $0.20 per share and has a dividend yield of 2.6%. AZZ pays out 27.2% of its earnings in the form of a dividend. LSI Industries pays out 105.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. AZZ has increased its dividend for 4 consecutive years.

Profitability

This table compares AZZ and LSI Industries’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
AZZ 6.27% 9.65% 5.13%
LSI Industries -4.96% 3.88% 2.37%

Summary

AZZ beats LSI Industries on 10 of the 17 factors compared between the two stocks.

About AZZ

AZZ Inc. provides galvanizing services, welding solutions, specialty electrical equipment, and highly engineered services to the power generation, transmission, distribution, refining, and industrial markets. The company operates through two segments, Energy and Galvanizing Services. The Energy segment provides specialized products and services designed to support industrial, nuclear, and electrical applications. This segment offers custom switchgear, electrical enclosures, medium and high voltage bus ducts, explosion proof and hazardous duty lighting, nuclear safety-related equipment, and tubular products to multi-national companies, and small independent companies. This segment sells its products through manufacturers' representatives, distributors, agents, and internal sales force. The Galvanizing Services segment offers hot dip galvanizing services to the steel fabrication industry. This segment serves fabricators or manufacturers that provide services to the electrical and telecommunications, bridge and highway, petrochemical, and general industrial markets, as well as original equipment manufacturers. As of February 28, 2017, the company operated 41 galvanizing plants located in Alabama, Arkansas, Arizona, Colorado, Indiana, Illinois, Louisiana, Kentucky, Minnesota, Mississippi, Missouri, Nebraska, Nevada, Ohio, Oklahoma, Tennessee, Texas, Virginia, and West Virginia in the United States; and Ontario, Quebec, and Nova Scotia, Canada. AZZ incorporated was founded in 1956 and is based in Fort Worth, Texas.

About LSI Industries

LSI Industries Inc. provides corporate visual image solutions in the United States, Canada, Australia, and Latin America. It operates in three segments: Lighting, Graphics, and Technology. The Lighting segment manufactures and markets outdoor and indoor lighting and lighting controls for the commercial, industrial, and multi-site retail markets, including the petroleum/convenience store, quick-service, and automotive markets. It primarily offers exterior area, interior, canopy, and landscape lightings, as well as lighting controls, light poles, and photometric layouts; lighting system design services; and solid-state LED solutions. The Graphics segment manufactures and sells exterior and interior visual image elements used in graphics displays and visual image programs in various markets that include the petroleum/convenience store market, quick-service restaurant, grocery, and multi-site retail operations. Its products comprise signage and canopy graphics, pump dispenser graphics, building fascia graphics and ACM systems, electrical signage, decals, interior signage and marketing graphics, aisle markers, wall mural graphics, fleet graphics, prototype program graphics, video boards, and digital signage and media content management products. This segment also provides installation management services for the installation of interior or exterior products. The Technology segment designs, engineers, and manufactures electronic circuit boards, assemblies, lighting controls, and solid-state LED lighting and lighting controls for use in original equipment manufacturer, transportation, commercial, industrial, and medical markets. The company was founded in 1976 and is headquartered in Cincinnati, Ohio.

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