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The following industrial companies are behind the scenes suppliers of various industrial parts and supplies. These companies provide products that are necessary for the industrial sector to function. In a nutshell, they provide the ‘nuts and bolts’ of industry to various sized businesses and the government. These companies vary significantly in valuation and earnings, so this analysis will determine which stocks are worth owning.

Fastenal

(FAST)

MSC Industrial

(MSM)

W.W.

Grainger

(GWW)

Applied

Industrial

(AIT)

Genuine

Parts

(GPC)

Wesco

International

(WCC)

Kaman

Corp.

(KAMN)

Forward

PE Ratio

30.93

15.97

18.28

13.27

15.45

12.19

11.53

PEG Ratio

2.11

1.25

1.41

1.15

1.98

0.94

0.84

Dividend

Yield

1.3%

1.4%

1.4%

2.1%

2.9%

N/A

2.4%

EPS

$1.13

$3.43

$8.86

$2.37

$3.47

$3.55

2.04

Operating

Cash Flow

$268.38

Million

$209.96

Million

$664.45

Million

$88.73

Million

$607.65

Million

$123.61

Million

$25.73

Million

Current

Ratio

5.56

4.4

1.88

2.92

2.07

2.14

2.72

5 Year Expected Annual Earnings Growth

17.32%

14.7%

14.95%

13%

8.8%

14.86%

17%

Fastenal (FAST) is a $12.87 billion large-cap wholesaler and retailer of industrial equipment. It supplies products such as: hydraulics, janitorial, paints and chemicals, fasteners, plumbing and HVAC, electrical, welding, safety, cutting tools, etc.

It looks a bit overvalued with its high PE and PEG ratios. The stock trades at 9.14 times book value per share. However, it does pay a dividend and has above average expected earnings growth. I think that it is a good stock to own, but I would wait for a pullback before jumping in. The stock is currently overbought and rich in valuation, which means that a sell-off is likely.

MSC Industrial (MSM) is a $4.49 billion mid-cap direct marketer and distributor of industrial products. It offers cutting tools, metalworking products, fasteners, machinery and hand tools, electric supplies, plumbing supplies, power transmission components, etc.

MSC looks fairly valued according to its PE and PEG ratios. The stock trades at 4.53 times book value per share. Its combination of dividend yield and expected earnings growth should provide investors with a nice 16.1% total annual yield. The stock currently looks overbought right now, so you can wait for a pullback before starting a position.

W. W. Grainger (GWW) is a $13.06 billion large-cap international marketer of maintenance and related products. Its products include: lighting and electrical, material handling equipment, plumbing, safety & security, cleaning, agricultural, tools, fasteners, welding, etc.

Its stock currently trades at 5.14 times book value per share and looks fairly valued. GWW has been consistent with earnings as it achieved 14.18% annual earnings growth over the past five years and is expected to grow at 14.95% for the next five years. It may provide investors with a total annual yield of 16.35% over the next five years if expectations are met. On another positive note, GWW has 5 upward earnings revisions for 2012 which may lead to some positive earnings surprises.

Applied Industrial (AIT) is a $1.48 billion small-cap industrial products company. Its products include: rubber products, power transmission components, bearings, tools, safety products, hydraulics, linear motion products, etc.

Applied Industrial looks undervalued as the stock trades at only 2.33 times book value per share. It has a nice operating cash flow of $88.73 million with zero debt. When combining its 2.1% dividend with its 5 year annual expected earnings growth of 13%, investors can expect a total annual yield of 15.1%. The stock does look overbought in the short term so waiting for a pullback might be wise before buying.

Genuine Parts (GPC) is a $9.53 billion mid-cap distributor of automotive and industrial replacement parts, office products, and electrical products.

GPC appears fairly valued according to its PE and PEG ratios. The stock trades at 3.3 times book value per share. It has an upward earnings revision for 2012. Although its 2.9% dividend is the highest of these industrials, its 5 year annual expected earnings growth of 8.8% is the lowest. It should be able to grow enough to edge the market if these expectations are met or exceeded. Like the other industrials, Genuine is temporarily overbought, so investors would be wise to wait for a pullback before jumping in.

Wesco International (WCC) is a $2.29 billion mid-cap supplier of electrical, industrial, construction, logistics and supply chain management products.

Wesco looks undervalued with low PE and PEG ratios. The stock trades at only 1.79 times book value per share. Although it doesn’t pay a dividend, it is expected to grow earnings annually at a healthy market beating 14.86% for the next five years.

Kaman Corporation (KAMN) is a $716 million small-cap aerospace and industrial distributor. Its aerospace segment offers: arming solutions for missile and bomb systems; support for maritime and medium to heavy lift helicopters; aircraft bearings and components; metallic and composite structures for commercial and military aircraft. It is also the largest distributor of musical instruments in the United States.

Kaman is the most undervalued industrial company among those in this article. The stock trades at only 1.8 times book value per share. Kaman has an upward earnings revision for 2012 and when combining its dividend and expected earnings growth, investors should enjoy a total annual yield of 19.4%.

Conclusion:

All of these are solid companies, but there are always a few that stand out due to valuation and potential earnings growth. Fastenal is growing earnings well, but I don’t like its overvaluation. It would be worth picking up at a much better valuation.

Kaman looks like the best investment among these industrials: it has the best valuation, the highest total annual yield, and due to its small size, it has the highest potential for growth. It is currently oversold, so now would be a good time to start a position in the stock for the long-term.

I also like W.W. Grainger as a more conservative pick. I’m impressed with its consistent earnings over time. GWW is a solid large-cap dividend grower. It looks positioned to beat the market over the next five years.

Source: Which Of These Industrial Companies Have Riveting Stocks?