Contrasting Stepan (NYSE:SCL) and Tokuyama (OTCMKTS:TKYMY)

Stepan (NYSE:SCL) and Tokuyama (OTCMKTS:TKYMY) are both small-cap basic materials companies, but which is the superior business? We will contrast the two businesses based on the strength of their institutional ownership, earnings, valuation, dividends, profitability, risk and analyst recommendations.

Institutional & Insider Ownership

82.7% of Stepan shares are owned by institutional investors. 6.9% of Stepan shares are owned by company 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.

Profitability

This table compares Stepan and Tokuyama’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Stepan	1.96%	3.70%	1.88%
Tokuyama	7.42%	9.06%	5.09%

Dividends

Stepan pays an annual dividend of $1.58 per share and has a dividend yield of 2.5%. Tokuyama pays an annual dividend of $0.26 per share and has a dividend yield of 2.0%. Stepan pays out 79.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Tokuyama pays out 22.2% of its earnings in the form of a dividend. Stepan has increased its dividend for 57 consecutive years. Stepan is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Ratings

This is a breakdown of current ratings and price targets for Stepan and Tokuyama, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Stepan	1	1	0	0	1.50
Tokuyama	0	0	0	0	0.00

Earnings & Valuation

This table compares Stepan and Tokuyama”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Stepan	$2.18 billion	0.65	$50.37 million	$1.98	31.75
Tokuyama	$2.25 billion	0.83	$154.35 million	$1.17	11.09

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

Volatility and Risk

Stepan has a beta of 1.05, suggesting that its share price is 5% more volatile than the S&P 500. Comparatively, Tokuyama has a beta of 0.14, suggesting that its share price is 86% less volatile than the S&P 500.

Summary

Stepan beats Tokuyama on 8 of the 15 factors compared between the two stocks.

About Stepan

Stepan Company, together with its subsidiaries, produces and sells specialty and intermediate chemicals to other manufacturers for use in various end products worldwide. It operates through three segments: Surfactants, Polymers, and Specialty Products. The Surfactants segment offers surfactants that are used in consumer and industrial cleaning and disinfection products, including detergents for washing clothes, dishes, carpets, and floors and walls, as well as shampoos and body washes; and other applications, such as fabric softeners, germicidal quaternary compounds, disinfectants, and lubricating ingredients. Its surfactants are also used in various applications, including emulsifiers for spreading agricultural products; and industrial applications comprising latex systems, plastics, and composites. The Polymers segment provides polyurethane polyols that are used in the manufacture of rigid foam for thermal insulation in the construction industry, as well as a base raw material for coatings, adhesives, sealants, and elastomers (CASE); polyester resins, including liquid and powdered products, which are used in CASE applications; and phthalic anhydride that is used in unsaturated polyester resins, alkyd resins, and plasticizers for applications in construction materials, as well as components of automotive, boating, and other consumer products. The Specialty Products segment offers flavors, emulsifiers, and solubilizers for use in food, flavoring, nutritional supplement, and pharmaceutical applications. Stepan Company was founded in 1932 and is headquartered in Northbrook, Illinois.

About Tokuyama

Tokuyama Corporation produces and sells various chemical products in Japan. The company operates through six segments: Chemicals, Cement, Electronics and Advanced Materials, Life Science, Eco Business, and Others. The Chemicals segment offers caustic soda, soda ash, calcium chloride, sodium silicate cullet, sodium bicarbonate, purified, vinyl chloride monomer, polyvinyl chloride resin, propylene oxide, methylene chloride, and chloroform. The Cement segment provides cement, ready-mixed concrete, and cement-type stabilizer, as well as engages in the resource recycling business. The Electronic and Advanced Materials segment provides polycrystalline silicon; fumed silica and tetrachlorosilane; aluminum nitride; high-purity chemicals for electronics manufacturing and photoresist developer; and isopropyl alcohol. The Life Science segment provides medical diagnosis systems, dental materials and equipment, pharmaceutical ingredients and intermediates, plastic lens-related materials for glasses, and microporous film. The Eco Business segment offers plastic window sashes, ion exchange membranes, as well as engages in waste gypsum board recycling activity. The company was formerly known as Tokuyama Soda Co., Ltd. and changed its name to Tokuyama Corporation in April 1994. Tokuyama Corporation was incorporated in 1918 and is headquartered in Tokyo, Japan.