Critical Review: Omega Flex (NASDAQ:OFLX) versus Komatsu (OTCMKTS:KMTUY)

Komatsu (OTCMKTS:KMTUY) and Omega Flex (NASDAQ:OFLX) are both industrials companies, but which is the superior investment? We will contrast the two companies based on the strength of their risk, valuation, profitability, analyst recommendations, dividends, earnings and institutional ownership.

Profitability

This table compares Komatsu and Omega Flex’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Komatsu	8.93%	10.51%	5.93%
Omega Flex	12.27%	14.26%	11.54%

Institutional & Insider Ownership

0.2% of Komatsu shares are owned by institutional investors. Comparatively, 36.1% of Omega Flex shares are owned by institutional investors. 2.9% of Komatsu shares are owned by insiders. Comparatively, 65.2% of Omega Flex shares are owned by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.

Analyst Recommendations

This is a summary of current ratings and price targets for Komatsu and Omega Flex, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Komatsu	0	1	0	2	3.33
Omega Flex	1	0	0	0	1.00

Dividends

Komatsu pays an annual dividend of $0.89 per share and has a dividend yield of 2.1%. Omega Flex pays an annual dividend of $1.36 per share and has a dividend yield of 5.6%. Komatsu pays out 32.6% of its earnings in the form of a dividend. Omega Flex pays out 114.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Omega Flex has raised its dividend for 7 consecutive years. Omega Flex is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Earnings and Valuation

This table compares Komatsu and Omega Flex”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Komatsu	$27.45 billion	1.45	$2.48 billion	$2.73	15.70
Omega Flex	$98.30 million	2.48	$14.83 million	$1.19	20.31

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

Risk & Volatility

Komatsu has a beta of 1.07, meaning that its share price is 7% more volatile than the S&P 500. Comparatively, Omega Flex has a beta of 0.44, meaning that its share price is 56% less volatile than the S&P 500.

Summary

Omega Flex beats Komatsu on 9 of the 16 factors compared between the two stocks.

About Komatsu

Komatsu Ltd. manufactures and sells construction, mining, and utility equipment in Japan, the Americas, Europe, China, Rest of Asia, Oceania, the Middle East, Africa, and CIS countries. It operates through three segments: Construction, Mining and Utility Equipment; Retail Finance; and Industrial Machinery and Others. The company offers construction and mining equipment, including excavators, wheel loaders, bulldozers, motor graders, dump truck, rope and hybrid shovels, electric wheel loaders, continuous miners, and jumbo drills. It also provides forestry equipment, including harvesters, forwarders, feller bunchers, excavators, mini excavators, and forklifts; demolition, waste, and recycling equipment, such as mobile crushers, hydraulic excavators, wheel loaders, and mini shovels; material handling equipment; and tunnel-boring machines, pipe layers, towing tractors, and engines. In addition, the company offers industrial machinery, including presses, sheet-metal machinery, 3D laser cutting machine, transfer machines, battery manufacturing equipment, wire saws, thermos modules, thermoelectric generation module, and temperature control products; quarry equipment; agricultural and livestock equipment; EH sensor device; iron and steel casting products; and logistics equipment. Further, the company provides retail financing; construction machinery rental services; remanufactured products; other support services; transportation, warehousing, packing, and other services; and purchases and sells used equipment. Komatsu Ltd. was founded in 1884 and is headquartered in Tokyo, Japan.

About Omega Flex

Omega Flex, Inc., together with its subsidiaries, manufactures and sells flexible metal hoses and accessories in North America and internationally. It offers flexible gas piping for use in residential and commercial buildings; fittings; containment pining; and corrugated medical tubing for use in hospitals, ambulatory care centers, dental, physician and veterinary clinics, laboratories, and other facilities. The company sells its products under the TracPipe, CounterStrike, AutoSnap, AutoFlare, DoubleTrac, DEF-Trac, and MediTrac brand names. It serves various markets, including construction, manufacturing, transportation, petrochemical, pharmaceutical, and other industries. The company sells its products through independent sales representatives, distributors, fabricating distributors, wholesalers, original equipment manufacturers, and direct sales, as well as through its website. The company was formerly known as Tofle America, Inc. and changed its name to Omega Flex, Inc. in 1996. Omega Flex, Inc. was incorporated in 1975 and is based in Exton, Pennsylvania.