Otis Worldwide (NYSE:OTIS) vs. Graham (NYSE:GHM) Critical Survey

Graham (NYSE:GHM) and Otis Worldwide (NYSE:OTIS) are both industrials companies, but which is the better stock? We will compare the two businesses based on the strength of their risk, dividends, institutional ownership, earnings, valuation, profitability and analyst recommendations.

Analyst Recommendations

This is a summary of recent recommendations and price targets for Graham and Otis Worldwide, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Graham	0	2	3	1	2.83
Otis Worldwide	1	5	3	0	2.22

Graham currently has a consensus target price of $60.00, indicating a potential upside of 7.79%. Otis Worldwide has a consensus target price of $103.71, indicating a potential upside of 19.83%. Given Otis Worldwide’s higher probable upside, analysts clearly believe Otis Worldwide is more favorable than Graham.

Institutional & Insider Ownership

69.5% of Graham shares are held by institutional investors. Comparatively, 88.0% of Otis Worldwide shares are held by institutional investors. 6.0% of Graham shares are held by company insiders. Comparatively, 0.2% of Otis Worldwide shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Dividends

Graham pays an annual dividend of $0.44 per share and has a dividend yield of 0.8%. Otis Worldwide pays an annual dividend of $1.68 per share and has a dividend yield of 1.9%. Graham pays out 35.5% of its earnings in the form of a dividend. Otis Worldwide pays out 49.6% 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. Otis Worldwide has raised its dividend for 5 consecutive years. Otis Worldwide is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Valuation & Earnings

This table compares Graham and Otis Worldwide”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Graham	$227.90 million	2.68	$12.23 million	$1.24	44.89
Otis Worldwide	$14.26 billion	2.37	$1.65 billion	$3.39	25.53

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

Profitability

This table compares Graham and Otis Worldwide’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Graham	6.43%	12.83%	5.85%
Otis Worldwide	9.41%	-30.67%	14.34%

Risk & Volatility

Graham has a beta of 0.97, meaning that its share price is 3% less volatile than the S&P 500. Comparatively, Otis Worldwide has a beta of 1, meaning that its share price has a similar volatility profile to the S&P 500.

Summary

Otis Worldwide beats Graham on 10 of the 17 factors compared between the two stocks.

About Graham

Graham Corporation, together with its subsidiaries, designs and manufactures fluid, power, heat transfer, and vacuum equipment for chemical and petrochemical processing, defense, space, petroleum refining, cryogenic, energy, and other industries. It offers power plant systems, including ejectors and surface condensers; torpedo ejection, propulsion, and power systems, such as turbines, alternators, regulators, pumps, and blowers; and thermal management systems comprising pumps, blowers, and drive electronics for defense sector. The company also provides rocket propulsion systems consisting of turbopumps and fuel pumps; cooling systems, which include pumps, compressors, fans, and blowers; and life support systems that comprise fans, pumps, and blowers for space industry. In addition, it offers heat transfer and vacuum systems, including ejectors, process and surface condensers, liquid ring pumps, heat exchangers, and nozzles; power generation systems, such as turbines, generators, compressors, and pumps; and thermal management systems comprising pumps, blowers, and electronics for energy sector. Further, the company offers heat transfer and vacuum systems consisting of ejectors, process and surface condensers, liquid ring pumps, heat exchangers, and nozzles for chemical and petrochemical processing industry. The company also services and sells spare parts for its equipment. It sells its products directly in the United States, the Middle East, Canada, Asia, South America, and internationally. Graham Corporation was founded in 1936 and is headquartered in Batavia, New York.

About Otis Worldwide

Otis Worldwide Corporation engages in manufacturing, installation, and servicing of elevators and escalators in the United States, China, and internationally. The company operates in two segments, New Equipment and Service. The New Equipment segment designs, manufactures, sells, and installs a range of passenger and freight elevators, as well as escalators and moving walkways for residential and commercial buildings, and infrastructure projects. This segment serves real-estate and building developers, and general contractors. It sells its products directly to customers, as well as through agents and distributors. The Service segment performs maintenance and repair services, as well as modernization services to upgrade elevators and escalators. Otis Worldwide Corporation was founded in 1853 and is headquartered in Farmington, Connecticut.