Rockwell Collins, Inc. (NYSE:COL) and Raytheon Company (NYSE:RTN) are both Industrial Goods companies that recently hit new highs. The recent price action of these companies has left many investors wondering what actions to take. To determine if one is a better investment than the other, we will compare the two names across various metrics, including growth, profitability, risk, return, dividends, and valuation.
Rockwell Collins, Inc. (NYSE:COL) operates in the Aerospace/Defense Products & Services segment of the Industrial Goods sector. The company has grown sales at a 8.50% annual rate over the past five years, putting it in the medium growth category. COL has a net profit margin of 10.30% and is more profitable than the average company in the Aerospace/Defense Products & Services industry. In terms of efficiency, COL has an asset turnover ratio of 0.53. This figure represents the amount of revenue a company generates per dollar of assets. COL’s financial leverage ratio is 1.92, which indicates that the company’s asset base is primarily funded by equity capital. Company’s return on equity, which is really just the product of the company’s profit margin, asset turnover, and financial leverage ratios, is 17.40%, which is worse than the Aerospace/Defense Products & Services industry average ROE.
Rockwell Collins, Inc. (COL) pays out an annual dividend of 1.32 per share. At the current valuation, this equates to a dividend yield of 0.98%. The company has a payout ratio of 27.30%. COL’s current dividend therefore should be sustainable. Stock’s free cash flow yield, which represents the amount of cash available to investors before dividends, expressed as a percentage of the stock price, is 3.25. All else equal, companies with higher FCF yields are viewed as cheaper. Company trades at a P/E ratio of 28.15, and is less expensive than the average stock in the Aerospace/Defense Products & Services industry. The average investment recommendation for COL, taken from a group of Wall Street Analysts, is 2.90, or a hold.
Over the past three months, Rockwell Collins, Inc. insiders have been net buyers, dumping a net of -551,308 shares. This implies that insiders have been feeling relatively bearish about the outlook for COL. Insider activity and sentiment signals are important to monitor because they can shed light on how “risky” a stock is perceived to be at it’s current valuation. Knowing this, it makes sense to look at beta, a measure of market risk. COL has a beta of 0.70 and therefore an below average level of market volatility.
Raytheon Company (NYSE:RTN) operates in the Aerospace/Defense Products & Services segment of the Industrial Goods sector. RTN has increased sales at a -0.60% CAGR over the past five years, and is considered a low growth stock. The company has a net profit margin of 8.80% and is more profitable than the average Aerospace/Defense Products & Services player. RTN’s asset turnover ratio is 0.82 and the company has financial leverage of 1.56. RTN’s return on equity of 20.60% is worse than the Aerospace/Defense Products & Services industry average.
Raytheon Company (RTN) pays a dividend of 3.19, which translates to dividend yield of 1.70% based on the current price. Stock has a payout ratio of 41.10%. According to this ratio, RTN should be able to continue making payouts at these levels. The company trades at a free cash flow yield of 0.01 and has a P/E of 25.32. Compared to the average company in the 58.90 space, RTN is relatively cheap. The average analyst recommendation for RTN is 1.70, or a buy.
Raytheon Company insiders have sold a net of -3,381 shares during the past three months, which implies that the company’s top executives have been feeling bearish about the stock’s outlook. Finally, RTN’s beta of 0.60 indicates that the stock has an below average level of market risk.
Rockwell Collins, Inc. (NYSE:RTN) scores higher than Raytheon Company (NYSE:COL) on 9 of the 13 measures compared between the two companies. RTN has the better fundamentals, scoring higher on efficiency, leverage and return metrics. RTN has better insider activity and sentiment signals.