Cabot Corporation (NYSE: CBT) and Kronos Worldwide (NYSE:KRO) are both mid-cap basic materials companies, but which is the better investment? We will compare the two businesses based on the strength of their valuation, risk, analyst recommendations, profitabiliy, institutional ownership, dividends and earnings.

Dividends

Cabot Corporation pays an annual dividend of $1.26 per share and has a dividend yield of 2.4%. Kronos Worldwide pays an annual dividend of $0.60 per share and has a dividend yield of 3.1%. Cabot Corporation pays out 33.7% of its earnings in the form of a dividend. Kronos Worldwide pays out 83.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Kronos Worldwide has increased its dividend for 5 consecutive years. Kronos Worldwide is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

This table compares Cabot Corporation and Kronos Worldwide’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Cabot Corporation 9.33% 16.83% 7.56%
Kronos Worldwide 5.93% 18.70% 6.51%

Institutional & Insider Ownership

85.5% of Cabot Corporation shares are held by institutional investors. Comparatively, 14.2% of Kronos Worldwide shares are held by institutional investors. 2.5% of Cabot Corporation shares are held by company insiders. Comparatively, 0.1% of Kronos Worldwide shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Volatility & Risk

Cabot Corporation has a beta of 1.05, meaning that its share price is 5% more volatile than the S&P 500. Comparatively, Kronos Worldwide has a beta of 2.08, meaning that its share price is 108% more volatile than the S&P 500.

Earnings and Valuation

This table compares Cabot Corporation and Kronos Worldwide’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Cabot Corporation $2.53 billion 1.32 $494.00 million $3.74 14.25
Kronos Worldwide $1.42 billion 1.60 $174.70 million $0.72 27.21

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

Analyst Recommendations

This is a summary of current ratings for Cabot Corporation and Kronos Worldwide, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Cabot Corporation 0 2 3 0 2.60
Kronos Worldwide 1 1 0 0 1.50

Cabot Corporation presently has a consensus target price of $59.60, suggesting a potential upside of 11.86%. Kronos Worldwide has a consensus target price of $12.00, suggesting a potential downside of 38.74%. Given Cabot Corporation’s stronger consensus rating and higher possible upside, analysts clearly believe Cabot Corporation is more favorable than Kronos Worldwide.

Summary

Cabot Corporation beats Kronos Worldwide on 11 of the 17 factors compared between the two stocks.

About Cabot Corporation

Cabot Corporation is a global specialty chemicals and performance materials company. The Company operates through four business segments: reinforcement materials, performance chemicals, purification solutions and specialty fluids. Reinforcement materials’ rubber grade carbon blacks are used to enhance the physical properties of the systems and applications in which they are incorporated. Its rubber blacks products are used in tires and industrial products. Performance Chemicals consists of two businesses: specialty carbons and formulations business, and metal oxides business. Purification Solutions’ activated carbon products are used for the purification of water, air and pharmaceuticals, among others, as either a colorant or a decolorizing agent in the production of food and beverage applications. Its specialty fluids segment produces and markets cesium formate as a drilling and completion fluid for use in high pressure and high temperature oil and gas well construction.

About Kronos Worldwide

Kronos Worldwide, Inc. (Kronos) is a producer and marketer of titanium dioxide (TiO2) pigments, a base industrial product that is used in a range of applications. The Company, along with its distributors and agents, sells and provides technical services for its products with sales in Europe and North America. It offers its customers a portfolio of products that include TiO2 pigment grades under the Kronos brand, which provides a range of performance properties. It offers its products to domestic and international paint, plastics, decorative laminate and paper manufacturers. It ships TiO2 to its customers in either a powder or slurry form through rail, truck or ocean carrier. It sells and provides technical services for its products in three end use markets, which include coatings, plastics and paper. It produces TiO2 in two crystalline forms, which include rutile and anatase. Rutile TiO2 is manufactured using both a chloride production process and a sulfate production process.

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