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Industrial Stocks Too Pricey? Compare Them to Tech Giants Microsoft, Intel

Manufacturing giants General Electric (GE), 3M (MMM), and United Technologies (UTX) all give an investor broad exposure to an expanding global economy – but why do they have to cost so much? The three industrial heavyweights each trade in the neighborhood of 15 times trailing earnings.

Maybe it’s time to consider mature tech giants as an alternative. Microsoft (MSFT) and Intel (INTC) have PEs closer to 11, yet they also provide broad exposure to the global economy and typically do well in an upturn.

Why pay more just because employees at one group of companies get their hands dirty?

Microsoft Corporation PE Ratio Chart

Microsoft Corporation PE Ratio Chart by YCharts

On dividend yield, the two tech giants are right in the mix with the older, supposedly more stable companies.

Microsoft Corporation Dividend Yield Chart

Microsoft Corporation Dividend Yield Chart by YCharts

And Microsoft and Intel enjoy stronger profit margins.

Microsoft Corporation Profit Margin Chart

Microsoft Corporation Profit Margin Chart by YCharts

There is always the possibility that a tech company becomes obsolete, of course, replaced by a more elegant piece of software of gadget. But absent that, Microsoft and Intel generally outclass the manufacturers in revenue growth.

Microsoft Corporation Revenue Growth Chart

Microsoft Corporation Revenue Growth Chart by YCharts

As a result, they're more than holding their own in terms of generating earnings.

Microsoft Corporation Net Income TTM Chart

Microsoft Corporation Net Income TTM Chart by YCharts

Michael McHugh is an editor for the YCharts Pro Investor Service which includes professional stock charts, stock ratings, stock screener and portfolio strategies.

Read more articles about: Company Analysis  

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