Critical Comparison: Tennant (NYSE:TNC) versus Flowserve (NYSE:FLS)

Tennant (NYSE:TNC) and Flowserve (NYSE:FLS) are both industrials companies, but which is the superior business? We will contrast the two businesses based on the strength of their dividends, earnings, profitability, institutional ownership, analyst recommendations, valuation and risk.

Insider & Institutional Ownership

93.3% of Tennant shares are owned by institutional investors. Comparatively, 93.9% of Flowserve shares are owned by institutional investors. 3.5% of Tennant shares are owned by insiders. Comparatively, 0.7% of Flowserve shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.

Analyst Ratings

This is a breakdown of current recommendations and price targets for Tennant and Flowserve, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Tennant	0	2	1	1	2.75
Flowserve	0	3	8	0	2.73

Tennant presently has a consensus target price of $91.00, indicating a potential upside of 0.61%. Flowserve has a consensus target price of $87.70, indicating a potential upside of 7.26%. Given Flowserve’s higher possible upside, analysts clearly believe Flowserve is more favorable than Tennant.

Risk & Volatility

Tennant has a beta of 1.12, suggesting that its share price is 12% more volatile than the S&P 500. Comparatively, Flowserve has a beta of 1.22, suggesting that its share price is 22% more volatile than the S&P 500.

Profitability

This table compares Tennant and Flowserve’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Tennant	2.55%	14.87%	7.17%
Flowserve	7.61%	21.46%	8.54%

Earnings & Valuation

This table compares Tennant and Flowserve”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Tennant	$1.21 billion	1.27	$43.80 million	$1.66	54.49
Flowserve	$4.73 billion	2.21	$346.25 million	$2.70	30.28

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

Dividends

Tennant pays an annual dividend of $1.24 per share and has a dividend yield of 1.4%. Flowserve pays an annual dividend of $0.88 per share and has a dividend yield of 1.1%. Tennant pays out 74.7% of its earnings in the form of a dividend. Flowserve pays out 32.6% 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. Tennant has raised its dividend for 53 consecutive years and Flowserve has raised its dividend for 1 consecutive years. Tennant is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

Flowserve beats Tennant on 12 of the 18 factors compared between the two stocks.

About Tennant

Tennant Company, together with its subsidiaries, designs, manufactures, and markets floor cleaning equipment in the Americas, Europe, the Middle East, Africa, and the Asia Pacific. The company offers a suite of products, including floor maintenance and cleaning equipment, detergent-free and other sustainable cleaning technologies, aftermarket parts and consumables, equipment maintenance and repair services, and asset management solutions. It provides business solutions, such as financing, rental, and leasing programs, as well as machine-to-machine asset management solutions. The company offers its products under the Tennant, Nobles, Alfa Uma Empresa Tennant, IPC, Gaomei, and Rongen brands, as well as private-label brands. Its products are used in retail establishments and distribution centers; factories and warehouses; and public venues, such as arenas and stadiums, office buildings, schools and universities, hospitals and clinics, and other environments. The company markets its products to contract cleaners and businesses through direct sales and service organizations, as well as through a network of authorized distributors. Tennant Company was founded in 1870 and is headquartered in Eden Prairie, Minnesota.

About Flowserve

Flowserve Corporation designs, manufactures, distributes, and services industrial flow management equipment in the United States, Canada, Mexico, Europe, the Middle East, Africa, and the Asia Pacific. It operates through Flowserve Pump Division (FPD) and Flow Control Division (FCD) segments. The FPD segment offers custom and pre-configured pumps and pump systems, mechanical seals, auxiliary systems, replacement parts, upgrades, and related aftermarket services; and equipment services, including installation and commissioning services, seal systems spare parts, repairs, advanced diagnostics, re-rate and upgrade solutions, retrofit programs, and machining and asset management solutions, as well as manufactures a gas-lubricated mechanical seal for use in high-speed compressors for gas pipelines and in the oil and gas production and process markets. The FCD segment provides engineered and industrial valve and automation systems, including isolation and control valves, actuation, controls, and related equipment; and equipment maintenance services for flow control systems, including advanced diagnostics, repair, installation, commissioning, retrofit programs, and field machining capabilities. This segment's products are used to control, direct, and manage the flow of liquids, gases, and multi-phase fluids. It primarily serves oil and gas, chemical and pharmaceuticals, power generation, and water management markets, as well as general industries, including mining and ore processing, pulp and paper, food and beverage, and other smaller applications. The company distributes its products through direct sales, distributors, and sales representatives. Flowserve Corporation was founded in 1790 and is headquartered in Irving, Texas.