Head-To-Head Analysis: Stepan (NYSE:SCL) and Tronox (NYSE:TROX)

Tronox (NYSE:TROX) and Stepan (NYSE:SCL) are both small-cap materials companies, but which is the better investment? We will contrast the two companies based on the strength of their institutional ownership, risk, profitability, earnings, dividends, analyst recommendations and valuation.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Tronox	-17.96%	-24.34%	-5.51%
Stepan	-0.11%	3.90%	2.01%

Earnings and Valuation

This table compares Tronox and Stepan”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Tronox	$2.90 billion	0.26	-$470.00 million	($3.46)	-1.34
Stepan	$2.33 billion	0.60	$46.90 million	($0.12)	-516.08

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

Risk & Volatility

Tronox has a beta of 0.79, meaning that its share price is 21% less volatile than the S&P 500. Comparatively, Stepan has a beta of 0.94, meaning that its share price is 6% less volatile than the S&P 500.

Analyst Ratings

This is a breakdown of current ratings for Tronox and Stepan, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Tronox	4	4	2	0	1.80
Stepan	1	1	0	0	1.50

Tronox currently has a consensus price target of $6.93, suggesting a potential upside of 49.16%. Given Tronox’s stronger consensus rating and higher possible upside, research analysts clearly believe Tronox is more favorable than Stepan.

Insider & Institutional Ownership

73.4% of Tronox shares are owned by institutional investors. Comparatively, 82.7% of Stepan shares are owned by institutional investors. 2.0% of Tronox shares are owned by company insiders. Comparatively, 6.6% of Stepan shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock is poised for long-term growth.

Dividends

Tronox pays an annual dividend of $0.20 per share and has a dividend yield of 4.3%. Stepan pays an annual dividend of $1.58 per share and has a dividend yield of 2.6%. Tronox pays out -5.8% of its earnings in the form of a dividend. Stepan pays out -1,316.7% 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. Stepan has increased its dividend for 57 consecutive years.

Summary

Stepan beats Tronox on 11 of the 17 factors compared between the two stocks.

About Tronox

Tronox Holdings plc operates as a vertically integrated manufacturer of TiO2 pigment in North America, South and Central America, Europe, the Middle East, Africa, and the Asia Pacific. The company operates titanium-bearing mineral sand mines; and engages in beneficiation and smelting operations. It offers TiO2 pigment; ultrafine specialty TiO2; zircon; feedstock; pig iron; monazite; titanium tetrachloride; and other products. The company’s products are used for the manufacture of paints, coatings, plastics, and paper, as well as various other applications. Tronox Holdings plc is based in Stamford, Connecticut.

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.