Gerdau (NYSE: GGB) and POSCO (NYSE:PKX) are both mid-cap basic materials companies, but which is the superior business? We will compare the two companies based on the strength of their earnings, dividends, risk, institutional ownership, valuation, profitability and analyst recommendations.

Insider and Institutional Ownership

5.3% of Gerdau shares are owned by institutional investors. Comparatively, 5.1% of POSCO shares are owned by institutional investors. 0.0% of Gerdau shares are owned by insiders. Comparatively, 0.0% of POSCO shares are owned by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Valuation & Earnings

This table compares Gerdau and POSCO’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Gerdau $10.98 billion 0.36 $1.13 billion ($0.31) -11.16
POSCO $50.91 billion 0.44 $6.18 billion $5.58 12.60

POSCO has higher revenue and earnings than Gerdau. Gerdau is trading at a lower price-to-earnings ratio than POSCO, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Gerdau and POSCO’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Gerdau -5.73% 3.47% 1.61%
POSCO 3.60% 4.41% 2.78%

Dividends

Gerdau pays an annual dividend of $0.01 per share and has a dividend yield of 0.3%. POSCO pays an annual dividend of $0.55 per share and has a dividend yield of 0.8%. Gerdau pays out -3.2% of its earnings in the form of a dividend. POSCO pays out 9.9% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years.

Risk and Volatility

Gerdau has a beta of 2.31, indicating that its share price is 131% more volatile than the S&P 500. Comparatively, POSCO has a beta of 1.11, indicating that its share price is 11% more volatile than the S&P 500.

Analyst Recommendations

This is a summary of current ratings for Gerdau and POSCO, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Gerdau 0 2 3 0 2.60
POSCO 0 2 3 0 2.60

Summary

POSCO beats Gerdau on 8 of the 12 factors compared between the two stocks.

Gerdau Company Profile

Gerdau S.A. (Gerdau) is a manufacturer of long steel in the North and South America. The Company is engaged in the production and commercialization of steel products in general, through its mills located in Argentina, Brazil, Canada, Chile, Colombia, Spain, the United States, Guatemala, India, Mexico, Peru, the Dominican Republic, Uruguay and Venezuela. Its segments are Brazil Operations, which includes operations of steel and iron ore in Brazil, except Special Steels, and the operation of metallurgical coal and coke in Colombia; North America Operations, which includes all operations in North America, except those of Mexico and Special Steels; South America Operations, which includes operations in South America, except Brazil and the operation of metallurgical coal and coke in Colombia, and Special Steel Operations, including special steel operations in Brazil, Spain, the United States and India. It supplies its customers a range of products, including iron ore semi-finished products.

POSCO Company Profile

POSCO is a Korea-based company principally engaged in the manufacture and distribution of steel products. The Company operates in four segments: steel, trading, construction, and others. The steel segment includes production of steel products and sale of such products. The trading segment consists of global trading activities of POSCO Daewoo Corporation, exporting and importing a range of steel products that are both obtained from and supplied to it, as well as between other suppliers and purchasers in Korea and overseas. The construction segment includes planning, designing and construction of industrial plants, civil engineering projects, and commercial and residential buildings, both in Korea and overseas. The others segment includes power generation, liquefied natural gas (LNG) logistics, and network and system integration.

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