Steel Dynamics (NASDAQ: STLD) and Synalloy Corporation (NASDAQ:SYNL) are both basic materials companies, but which is the superior investment? We will compare the two companies based on the strength of their profitabiliy, analyst recommendations, risk, institutional ownership, dividends, valuation and earnings.

Dividends

Steel Dynamics pays an annual dividend of $0.62 per share and has a dividend yield of 1.9%. Synalloy Corporation does not pay a dividend. Steel Dynamics pays out 29.2% of its earnings in the form of a dividend.

Insider and Institutional Ownership

83.6% of Steel Dynamics shares are held by institutional investors. Comparatively, 47.4% of Synalloy Corporation shares are held by institutional investors. 4.2% of Steel Dynamics shares are held by company insiders. Comparatively, 10.6% of Synalloy Corporation shares are held 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.

Profitability

This table compares Steel Dynamics and Synalloy Corporation’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Steel Dynamics 6.19% 21.77% 9.17%
Synalloy Corporation -3.45% -1.56% -0.97%

Volatility & Risk

Steel Dynamics has a beta of 1.29, suggesting that its share price is 29% more volatile than the S&P 500. Comparatively, Synalloy Corporation has a beta of 0.12, suggesting that its share price is 88% less volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of current ratings and price targets for Steel Dynamics and Synalloy Corporation, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Steel Dynamics 0 2 13 0 2.87
Synalloy Corporation 0 0 0 0 N/A

Steel Dynamics presently has a consensus price target of $39.07, indicating a potential upside of 17.69%. Given Steel Dynamics’ higher possible upside, equities analysts plainly believe Steel Dynamics is more favorable than Synalloy Corporation.

Valuation and Earnings

This table compares Steel Dynamics and Synalloy Corporation’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Steel Dynamics $8.40 billion 0.96 $1.36 billion $2.12 15.66
Synalloy Corporation $144.46 million 0.68 $3.34 million ($0.58) -19.48

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

Summary

Steel Dynamics beats Synalloy Corporation on 12 of the 14 factors compared between the two stocks.

Steel Dynamics Company Profile

Steel Dynamics, Inc. is a steel producing and a metal recycling company. The Company is engaged in the manufacture and sale of steel products, processing and sale of recycled ferrous and nonferrous metals, and fabrication and sale of steel joists and deck products. Its segments include steel operations, metals recycling operations, steel fabrication operations and Other Operations. It offers a range of steel products, such as sheet products, long products and steel finishing. The steel operations segment includes Butler Flat Roll Division, Columbus Flat Roll Division, The Techs galvanizing lines, Structural and Rail Division, Engineered Bar Products Division, Roanoke Bar Division, Steel of West Virginia and Iron Dynamics. The metals recycling operations segment consists of OmniSource Corporation. The fabrication operations produce steel building components. The Other Operations segment consists of subsidiary operations and smaller joint ventures.

Synalloy Corporation Company Profile

Synalloy Corporation is a chemical manufacturing company. The Company operates through two segments: the Metals Segment and the Specialty Chemicals Segment. The Company’s Metals Segment comprises three subsidiaries: Synalloy Metals, Inc., which owns Bristol Metals, LLC (BRISMET), located in Bristol, Tennessee; Palmer of Texas Tanks, Inc. (Palmer), located in Andrews, Texas; and Specialty Pipe & Tube, Inc. (Specialty), located in Mineral Ridge, Ohio and Houston, Texas. The Company’s Metals Segment manufactures stainless steel, other alloy pipe, storage solutions and separation equipment. The Company’s Specialty Chemicals segment consists of the Company’s subsidiary, Manufacturers Soap and Chemical Company (MS&C). The Specialty Chemicals Segment manufactures lubricants, surfactants, reaction intermediaries, sulfated fats and oils, and chemical tolling manufacturing resources.

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