Federal Signal Corporation (NYSE: FSS) and Allison Transmission Holdings (NYSE:ALSN) are both multi-sector conglomerates companies, but which is the superior business? We will contrast the two companies based on the strength of their profitability, institutional ownership, dividends, valuation, analyst recommendations, earnings and risk.
Insider and Institutional Ownership
81.7% of Federal Signal Corporation shares are held by institutional investors. 4.2% of Federal Signal Corporation shares are held by insiders. Comparatively, 7.9% of Allison Transmission Holdings shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock will outperform the market over the long term.
This table compares Federal Signal Corporation and Allison Transmission Holdings’ net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
|Federal Signal Corporation||5.30%||11.39%||5.64%|
|Allison Transmission Holdings||16.34%||45.65%||8.34%|
Earnings and Valuation
This table compares Federal Signal Corporation and Allison Transmission Holdings’ gross revenue, earnings per share and valuation.
|Gross Revenue||Price/Sales Ratio||NetIncome||Earnings Per Share||Price/Earnings Ratio|
|Federal Signal Corporation||$707.90 million||1.77||$43.80 million||$0.73||28.66|
|Allison Transmission Holdings||$1.84 billion||3.26||$214.90 million||$2.26||18.70|
Allison Transmission Holdings has higher revenue and earnings than Federal Signal Corporation. Allison Transmission Holdings is trading at a lower price-to-earnings ratio than Federal Signal Corporation, indicating that it is currently the more affordable of the two stocks.
Federal Signal Corporation pays an annual dividend of $0.28 per share and has a dividend yield of 1.3%. Allison Transmission Holdings pays an annual dividend of $0.60 per share and has a dividend yield of 1.4%. Federal Signal Corporation pays out 38.4% of its earnings in the form of a dividend. Allison Transmission Holdings pays out 26.5% 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. Federal Signal Corporation has raised its dividend for 4 consecutive years and Allison Transmission Holdings has raised its dividend for 2 consecutive years. Allison Transmission Holdings is clearly the better dividend stock, given its higher yield and lower payout ratio.
Risk and Volatility
Federal Signal Corporation has a beta of 1.32, suggesting that its share price is 32% more volatile than the S&P 500. Comparatively, Allison Transmission Holdings has a beta of 1.24, suggesting that its share price is 24% more volatile than the S&P 500.
This is a summary of recent ratings and target prices for Federal Signal Corporation and Allison Transmission Holdings, as reported by MarketBeat.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
|Federal Signal Corporation||0||0||2||0||3.00|
|Allison Transmission Holdings||2||7||4||0||2.15|
Federal Signal Corporation presently has a consensus price target of $20.00, suggesting a potential downside of 4.40%. Allison Transmission Holdings has a consensus price target of $42.78, suggesting a potential upside of 1.20%. Given Allison Transmission Holdings’ higher possible upside, analysts clearly believe Allison Transmission Holdings is more favorable than Federal Signal Corporation.
Allison Transmission Holdings beats Federal Signal Corporation on 12 of the 17 factors compared between the two stocks.
About Federal Signal Corporation
Federal Signal Corporation designs, manufactures and supplies a suite of products and integrated solutions for municipal, governmental, industrial and commercial customers. The Company’s segments include the Environmental Solutions Group and the Safety and Security Systems Group. Its Environmental Solutions Group manufactures and supplies a range of street sweeper vehicles, sewer cleaner and vacuum loader trucks, hydro-excavation trucks and waterblasting equipment. The products are sold to both municipal and industrial customers under the Elgin, Vactor, Guzzler and Jetstream brand names. Safety and Security Systems is a manufacturer and supplier of systems and products that law enforcement, fire rescue, emergency medical services, campuses military facilities and industrial sites use to protect people and property. It offers systems for campus and community alerting, emergency vehicles, first responder interoperable communications and industrial communications, among others.
About Allison Transmission Holdings
Allison Transmission Holdings, Inc. and its subsidiaries design and manufacture commercial and defense fully-automatic transmissions. The Company manufactures fully-automatic transmissions for medium- and heavy-duty commercial vehicles, and medium-and heavy-tactical United States defense vehicles. The Company’s transmissions are used in a range of applications, including on-highway trucks (distribution, refuse, construction, fire and emergency), buses (primarily school, transit and hybrid-transit), motorhomes, off-highway vehicles and equipment (energy, mining and construction) and defense vehicles (wheeled and tracked). The Company’s transmissions are sold under the Allison Transmission brand name and remanufactured transmissions are sold under the ReTran brand name. The Company has developed over 100 different models that were used in more than 2,500 different vehicle configurations and were compatible with over 500 combinations of engines, as of December 31, 2016.
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