This HVAC Company Appears To Be A Better Bet Over Johnson Controls Stock

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we think that Tran Technologies Stock (NYSE:TT), a heating, ventilating and air conditioning systems, building management systems, and control company, is currently a better pick than its industry counterpart. johnson control stock (NYSE:JCI), despite Tran Technologies being the more expensive of the two. Tran Technologies trades at approximately 3.3x trailing revenue, compared to 2.3x for Johnson Controls. Although both companies have seen an uptick in demand in recent years, Tran Technologies’ financials have outperformed in recent years. However, there is much more to compare. Let’s take a step back to see a more complete picture of the relative valuations of both companies looking at historical revenue growth as well as operating margin growth. our dashboard Johnson Controls vs Tran Technologies, industry peers; Which stock is the better bet? There is more detail on this. The excerpts of the analysis are summarized below.

1. Tran Technologies Revenue Growth Has Been Better

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Tran Technologies’ revenue growth over the past twelve-month period was slightly better than that of Johnson Controls (9% versus 3%), noting a rebound in demand for residential climate control products. Note that Johnson Controls’ business had a more profound impact during the pandemic, especially in the North America region, which is the largest segment, compared to Tran Technologies, given the decline in non-residential construction activity. 40% share. Company’s total sales.

Looking at the longer time frame, Johnson Controls’ revenue grew at a CAGR of -0.8% over the past three fiscal years, compared to -4.3% CAGR for Tran Technologies. Note that Tran Technologies was formed following a spin-off of the industrial segment of Ingersoll-Rand and a merger with a subsidiary of Gardner Denver, which affected the overall revenue change. If we look at adjusted revenue, it actually grew at a CAGR of 3.7%.

Now with the gradual opening up of economies, the demand for manufacturing products including HVAC is expected to rise further. In fact, Johnson Controls has guided revenue to grow at 6% to 7% CAGR by FY2024. Our Johnson controls revenue The dashboard provides more information on the revenue of the company. Tran Technologies also expects to see steady revenue growth with strong demand for its HVAC products and services.

2. Tran Technologies Margins Are Superior

Similar to the pattern seen in revenue growth, Tran Technologies’ operating margin of 14.4% over the past twelve-month period is slightly better than Johnson Controls’ 10.0%, and this compares with the 12.6% and 4.4% figures seen in 2019. Is. epidemics respectively. Even if we look at the average operating margin for the last three fiscal years, Tran Technologies’ 12% figure is better than the 5% for Johnson Controls. Overall, for both companies, margins are rising, but Tran Technologies’ current and historical operating margins have been better than Johnson Controls.

net of it all

Now that nearly 60% of the US population is fully vaccinated against COVID-19, with overall economic activity, demand for non-residential building solutions is likely to continue to rise, bodes well for Johnson Controls. Continued demand for HVAC will benefit both the companies.

That said, COVID-19 is proving to be more difficult than initially thought, due to the spread of more infectious virus variants and infections in certain geographies, including Europe, than they were a few months ago. The concerns around Omicron have shaken the mass markets with several confirmed cases in the US as well. If the new version leads to another major spike in Covid-19 cases, it will hamper the economic recovery and impact sales as well as the growth in earnings of both the companies.

While Johnson Controls’ current valuation is certainly more attractive than that of Tran Technologies, with JCI stock trading approximately 2.3x trailing revenue, 3.3x for TT, the latter has demonstrated better revenue growth and is more profitable. . Not only that, even if we look at financial risk, Tran Technologies’ 11% debt is better than Johnson Controls’ 13% as a percentage of its equity, and also, Tran Technologies’ 16% as a percentage of assets. There is also cash. Better than the 3% figure for Johnson Controls, which means TT has a better debt and liquidity position.

Overall, Tran Technologies surpasses Johnson Controls in most metrics that matter to investors, and we think this gap in valuation between the two companies is fair enough. In fact, looking ahead, it is likely that the valuation gap between these two companies will persist in the near future and Tran Technologies may continue to outperform with its superior growth prospects and lower risk appetite.

While TT stock could see higher levels, 2020 has created several pricing discontinuities that could provide lucrative trading opportunities. For example, you’d be surprised how intuitive it is to approach stock valuations. Tran Technologies vs Logitech,

Wondering how Johnson Controls Piers stack up? check out Johnson Controls Stock Comparison with Peers Click here to see how JCI stock compares against peers on important metrics. You can find more useful comparisons like this here peer comparison,

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