Stepan (NYSE: SCL) and Cytec Industries (NYSE:CYT) are both basic materials companies, but which is the better investment? We will compare the two companies based on the strength of their institutional ownership, profitability, valuation, analyst recommendations, dividends, earnings and risk.

Profitability

This table compares Stepan and Cytec Industries’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Stepan 4.81% 13.98% 6.91%
Cytec Industries 11.96% 18.60% 8.55%

Insider and Institutional Ownership

61.9% of Stepan shares are owned by institutional investors. 13.1% of Stepan shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Analyst Recommendations

This is a breakdown of recent recommendations and price targets for Stepan and Cytec Industries, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Stepan 0 2 2 1 2.80
Cytec Industries 0 0 0 0 N/A

Stepan presently has a consensus price target of $36.25, suggesting a potential downside of 54.37%. Given Stepan’s higher probable upside, equities analysts plainly believe Stepan is more favorable than Cytec Industries.

Dividends

Stepan pays an annual dividend of $0.82 per share and has a dividend yield of 1.0%. Cytec Industries does not pay a dividend. Stepan pays out 21.2% of its earnings in the form of a dividend. Stepan has raised its dividend for 3 consecutive years and Cytec Industries has raised its dividend for 49 consecutive years.

Valuation & Earnings

This table compares Stepan and Cytec Industries’ revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio NetIncome Earnings Per Share Price/Earnings Ratio
Stepan $1.77 billion 1.01 $86.19 million $3.86 20.58
Cytec Industries N/A N/A N/A $1.78 42.23

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

Summary

Stepan beats Cytec Industries on 8 of the 13 factors compared between the two stocks.

Stepan Company Profile

Stepan Company produces specialty and intermediate chemicals, which are sold to other manufacturers and used in a range of end products. The Company operates through three segments: Surfactants, Polymers and Specialty Products. The Company’s principal markets include manufacturers of cleaning and washing compounds (including detergents, shampoos, fabric softeners, toothpastes and household cleaners), paints, cosmetics, food, beverages, nutritional supplements, agricultural products and plastics. Its Surfactants segment offers products, which are principal ingredients in consumer and industrial cleaning products, such as detergents for washing clothes, dishes, carpets, floors and walls, as well as shampoos and body washes. Its Polymers segment includes polyurethane polyols, polyester resins and phthalic anhydride. Its Specialty Products segment includes flavors, emulsifiers and solubilizers used in food, flavoring, nutritional supplement and pharmaceutical applications.

Cytec Industries Company Profile

Cytec Industries Inc. is a global specialty materials and chemicals company focused on developing, manufacturing and selling value-added products. The Company offers aerospace and industrial materials, mining and plastics industries. The Company operates through four segments: Aerospace Materials, Industrial Materials, In Process Separation, and Additive Technologies. The Aerospace Materials segment includes advanced composites, carbon fiber, and structural film adhesives. The Industrial Materials segment includes structural composite materials, which serve automotive, motorsports, recreation, tooling, and other structural materials markets and process materials, which serves aerospace, wind energy, and other process materials markets. The In Process Separation segment includes mining chemicals and phosphines. The Additive Technologies segment includes polymer additives, specialty additives, and formulated resins. The Company operates as a wholly owned subsidiary of Solvay.

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