Financial Review: Aperam (OTCMKTS:APEMY) and Gerdau (NYSE:GGB)

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

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Aperam	-0.13%	0.47%	0.25%
Gerdau	4.38%	5.92%	3.83%

Volatility & Risk

Aperam has a beta of 1.1, suggesting that its stock price is 10% more volatile than the S&P 500. Comparatively, Gerdau has a beta of 1.49, suggesting that its stock price is 49% more volatile than the S&P 500.

Earnings & Valuation

This table compares Aperam and Gerdau”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Aperam	$6.77 billion	0.43	$249.96 million	($0.12)	-333.33
Gerdau	$12.43 billion	0.60	$846.59 million	$0.27	13.87

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

Dividends

Aperam pays an annual dividend of $1.97 per share and has a dividend yield of 4.9%. Gerdau pays an annual dividend of $0.20 per share and has a dividend yield of 5.3%. Aperam pays out -1,641.7% of its earnings in the form of a dividend. Gerdau pays out 74.1% 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.

Analyst Recommendations

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

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Aperam	0	4	1	0	2.20
Gerdau	0	3	1	0	2.25

Gerdau has a consensus price target of $4.60, indicating a potential upside of 22.83%. Given Gerdau’s stronger consensus rating and higher possible upside, analysts clearly believe Gerdau is more favorable than Aperam.

Insider and Institutional Ownership

1.5% of Gerdau shares are held by institutional investors. 0.2% of Aperam shares are held by company insiders. Comparatively, 0.0% of Gerdau shares are held by company 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.

Summary

Gerdau beats Aperam on 13 of the 15 factors compared between the two stocks.

About Aperam

Aperam S.A., together with its subsidiaries, produces and sells stainless and specialty steel products worldwide. It operates through four segments: Stainless & Electrical Steel; Services & Solutions; Alloys & Specialties; and Recycling & Renewables. The company offers a range of stainless steel products, including grain oriented and non-grain oriented electrical steel products, and specialty alloys. It is also involved in the management of direct sales of stainless steel products from production facilities; distribution of its products; and the provision of transformation services that include value added and customized steel solutions. In addition, the company designs, produces, and transforms various specialty alloys and other specific stainless steels in forms, such as bars, semis, cold-rolled strips, wire and wire rods, and plates in a range on grades. Further, it engages in the trading, processing, and recycling of raw materials, such as superalloys and titanium; provides Recyco, an electric arc furnace recycling facility that retrieves dust and sludge to recycle stainless steel raw materials and reduce waste; and produces wood and charcoal from cultivated eucalyptus forests. The company serves customers in aerospace, automotive, catering, construction, household appliances, electrical engineering, industrial processes, medical, and oil and gas industries. It distributes its products through a network of steel service centers, transformation facilities, and sales offices. The company was incorporated in 2010 and is headquartered in Luxembourg, Luxembourg.

About Gerdau

Gerdau S.A., together with its subsidiaries, operates as a steel producer company. The company operates through Brazil Business, North America Business, South America Business, and Special Steel Business segments. It also provides semi-finished products, including billets, blooms, and slabs; common long rolled products, such as rebars, wire rods, merchant bars, light shapes, and profiles to the construction and manufacturing industries; drawn products comprising barbed and barbless fence wires, galvanized wires, fences, concrete reinforcing wire mesh, nails, and clamps for manufacturing, construction, and agricultural industries; and special steel products used in auto parts, light and heavy vehicles, and agricultural machinery, as well as in the oil and gas, wind energy, machinery and equipment, mining and rail, and other markets. In addition, the company offers flat products, such as hot-rolled steel coils and heavy plates; and resells flat steel products. Further, it operates mines that produce iron ore located in the Brazilian state of Minas Gerais. The company sells its products through independent distributors, direct sales from the mills, and its retail network. Gerdau S.A. was founded in 1901 and is based in São Paulo, Brazil.