Critical Analysis: Xylem (NYSE:XYL) & IHI (OTCMKTS:IHICY)

Xylem (NYSE:XYL) and IHI (OTCMKTS:IHICY) are both large-cap industrials companies, but which is the better investment? We will contrast the two companies based on the strength of their dividends, institutional ownership, earnings, valuation, profitability, analyst recommendations and risk.

Earnings and Valuation

This table compares Xylem and IHI”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Xylem	$9.04 billion	2.39	$957.00 million	$4.52	20.83
IHI	$10.92 billion	1.53	$1.06 billion	$1.15	13.39

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

Analyst Recommendations

This is a breakdown of current ratings and recommmendations for Xylem and IHI, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Xylem	2	8	9	0	2.37
IHI	0	1	0	0	2.00

Xylem presently has a consensus target price of $121.31, suggesting a potential upside of 28.86%. Given Xylem’s stronger consensus rating and higher possible upside, equities analysts plainly believe Xylem is more favorable than IHI.

Profitability

This table compares Xylem and IHI’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Xylem	11.94%	12.06%	7.51%
IHI	11.10%	28.06%	7.62%

Dividends

Xylem pays an annual dividend of $1.72 per share and has a dividend yield of 1.8%. IHI pays an annual dividend of $0.07 per share and has a dividend yield of 0.5%. Xylem pays out 38.1% of its earnings in the form of a dividend. IHI pays out 6.1% 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. Xylem has raised its dividend for 2 consecutive years. Xylem is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Risk & Volatility

Xylem has a beta of 1.01, suggesting that its stock price is 1% more volatile than the S&P 500. Comparatively, IHI has a beta of 0.75, suggesting that its stock price is 25% less volatile than the S&P 500.

Institutional and Insider Ownership

88.0% of Xylem shares are owned by institutional investors. 0.3% of Xylem shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Summary

Xylem beats IHI on 12 of the 17 factors compared between the two stocks.

About Xylem

Xylem Inc. is a water technology company that develops equipment, software and services for managing water and wastewater. Its offerings include pumps and treatment systems, water-quality testing and analysis, smart meters, monitoring and control technologies, and services for detecting leaks and maintaining water infrastructure. The company serves water and wastewater utilities, industrial and commercial customers, and residential markets. Its technologies support the movement, treatment, testing and efficient use of water across municipal and industrial systems.

About IHI

IHI Corporation is a Japanese engineering and manufacturing company headquartered in Tokyo. Its history dates to the founding of Ishikawajima Shipyard in 1853. The company was formed through the 1960 merger of Ishikawajima Heavy Industries and Harima Shipbuilding & Engineering, and adopted the name IHI Corporation in 2007. IHI designs and supplies equipment and systems for energy and industrial applications, including boilers, turbines, compressors and machinery for plants. It also works on infrastructure such as bridges and other large structures, as well as transportation and industrial systems.