Analyzing MSC Industrial Direct (NYSE:MSM) & Energy Recovery (ERII)

Energy Recovery (NASDAQ: ERII) and MSC Industrial Direct (NYSE:MSM) are both industrial products companies, but which is the superior investment? We will contrast the two companies based on the strength of their profitability, analyst recommendations, risk, earnings, valuation, institutional ownership and dividends.

Volatility & Risk

Energy Recovery has a beta of 5.51, indicating that its stock price is 451% more volatile than the S&P 500. Comparatively, MSC Industrial Direct has a beta of 0.5, indicating that its stock price is 50% less volatile than the S&P 500.

Earnings and Valuation

This table compares Energy Recovery and MSC Industrial Direct’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Energy Recovery $55.87 million 6.01 $3.95 million $0.03 209.07
MSC Industrial Direct $2.88 billion 1.05 $443.59 million $3.99 16.86

MSC Industrial Direct has higher revenue and earnings than Energy Recovery. MSC Industrial Direct is trading at a lower price-to-earnings ratio than Energy Recovery, indicating that it is currently the more affordable of the two stocks.

Institutional & Insider Ownership

33.9% of Energy Recovery shares are held by institutional investors. Comparatively, 78.0% of MSC Industrial Direct shares are held by institutional investors. 23.6% of Energy Recovery shares are held by company insiders. Comparatively, 31.3% of MSC Industrial Direct shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Dividends

MSC Industrial Direct pays an annual dividend of $1.80 per share and has a dividend yield of 2.7%. Energy Recovery does not pay a dividend. MSC Industrial Direct pays out 45.1% of its earnings in the form of a dividend. Energy Recovery has raised its dividend for 6 consecutive years.

Analyst Recommendations

This is a summary of current recommendations and price targets for Energy Recovery and MSC Industrial Direct, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Energy Recovery 0 0 5 0 3.00
MSC Industrial Direct 1 10 4 0 2.20

Energy Recovery currently has a consensus price target of $18.40, indicating a potential upside of 193.46%. MSC Industrial Direct has a consensus price target of $90.17, indicating a potential upside of 34.02%. Given Energy Recovery’s stronger consensus rating and higher possible upside, equities research analysts clearly believe Energy Recovery is more favorable than MSC Industrial Direct.

Profitability

This table compares Energy Recovery and MSC Industrial Direct’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Energy Recovery 3.07% 2.43% 1.07%
MSC Industrial Direct 8.07% 20.05% 11.38%

Summary

MSC Industrial Direct beats Energy Recovery on 9 of the 17 factors compared between the two stocks.

About Energy Recovery

Energy Recovery, Inc. is an energy solutions provider to industrial fluid flow markets. The Company’s solutions convert wasted pressure energy into a reusable asset and preserve or eliminate pumping technology in hostile processing environments. Its segments include Water, Oil & Gas, and Corporate. The Water Segment focuses on products sold for use in reverse osmosis water desalination. The Oil & Gas Segment consists of products sold for use in hydraulic fracturing, gas processing, and chemical processing. The Company offers energy recovery devices (ERDs) in the water desalination market with its pressure exchanger (PX) and turbocharger technologies. The Company offers VorTeq hydraulic fracturing system, IsoBoost, and IsoGen product lines to the oil and gas market. The Company’s customers include engineering, procurement and construction companies, original equipment manufacturers, international oil companies, national oil companies, and exploration and production companies.

About MSC Industrial Direct

MSC Industrial Direct Co., Inc. is a North American distributor of metalworking and maintenance, repair and operations (MRO) products and services. The Company’s range of MRO products include cutting tools, measuring instruments, tooling components, metalworking products, fasteners, flat stock, raw materials, abrasives, machinery hand and power tools, safety and janitorial supplies, plumbing supplies, materials handling products, power transmission components and electrical supplies. The Company serves a range of customers throughout the United States, Canada and the United Kingdom, from individual machine shops, to manufacturing companies, to government agencies, such as the General Services Administration and the Department of Defense. The Company also serves durable and non-durable goods manufacturing, education and healthcare markets, among others. As of September 3, 2016, the Company had operated a network of 12 customer fulfillment centers.

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