Versum Materials (NYSE: VSM) and Ecolab (NYSE:ECL) are both mid-cap basic materials companies, but which is the better stock? We will compare the two businesses based on the strength of their risk, earnings, valuation, profitabiliy, dividends, institutional ownership and analyst recommendations.

Profitability

This table compares Versum Materials and Ecolab’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Versum Materials N/A N/A N/A
Ecolab 9.47% 18.96% 7.02%

Dividends

Versum Materials pays an annual dividend of $0.20 per share and has a dividend yield of 0.6%. Ecolab pays an annual dividend of $1.48 per share and has a dividend yield of 1.1%. Ecolab pays out 34.9% of its earnings in the form of a dividend. Ecolab has increased its dividend for 31 consecutive years. Ecolab is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Institutional & Insider Ownership

88.3% of Versum Materials shares are held by institutional investors. Comparatively, 75.7% of Ecolab shares are held by institutional investors. 0.5% of Versum Materials shares are held by insiders. Comparatively, 1.5% of Ecolab shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Earnings and Valuation

This table compares Versum Materials and Ecolab’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Versum Materials $1.03 billion 3.56 $338.40 million N/A N/A
Ecolab $13.22 billion 2.91 $2.88 billion $4.24 31.30

Ecolab has higher revenue and earnings than Versum Materials.

Analyst Recommendations

This is a summary of recent ratings and price targets for Versum Materials and Ecolab, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Versum Materials 0 4 6 0 2.60
Ecolab 1 7 8 0 2.44

Versum Materials currently has a consensus target price of $32.44, suggesting a potential downside of 3.70%. Ecolab has a consensus target price of $129.31, suggesting a potential downside of 2.57%. Given Ecolab’s higher probable upside, analysts plainly believe Ecolab is more favorable than Versum Materials.

Summary

Ecolab beats Versum Materials on 10 of the 14 factors compared between the two stocks.

About Versum Materials

Versum Materials, Inc. is a provider of solutions to the semiconductor and display industries. The Company is engaged in the development, manufacturing, transportation and handling of specialty materials. Its segments include Materials; Delivery Systems and Services (DS&S), and Corporate. The Materials segment is an integrated provider of specialty materials for the electronics industry, focusing on the integrated circuit and flat-panel display markets. The DS&S segment designs, manufactures, installs, operates, and maintains chemical and gas delivery and distribution systems for specialty gases and chemicals delivered directly to its customers’ manufacturing tools. The Company is engaged in molecular design and synthesis, purification, advanced analytics, formulation development and containers and delivery systems for the handling of high purity materials.

About Ecolab

Ecolab Inc. provides water, hygiene and energy technologies and services. The Company’s cleaning and sanitizing programs and products, pest elimination services and equipment maintenance and repair services support customers in the foodservice, food and beverage processing, hospitality, healthcare, government and education, retail, textile care and commercial facilities management sectors in over 170 countries. Its segments include Global Industrial, Global Institutional, Global Energy, Other and Corporate. Its Global Industrial segment consists of the Water, Food and Beverage, Paper and Textile Care operating units. Its Global Institutional segment consists of the Institutional, Specialty and Healthcare operating units. The Global Energy segment provides on-site and technology-driven solutions to the global drilling, oil and gas production, refining, and petrochemical industries. The Company’s Other segment consists of the Pest Elimination and Equipment Care operating units.

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