POSCO (NYSE: PKX) and Steel Dynamics (NASDAQ:STLD) are both mid-cap basic materials companies, but which is the better investment? We will compare the two companies based on the strength of their dividends, risk, institutional ownership, analyst recommendations, earnings, valuation and profitability.

Valuation and Earnings

This table compares POSCO and Steel Dynamics’ revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
POSCO $48.85 billion 0.49 $5.86 billion $4.97 14.93
Steel Dynamics $8.77 billion 0.92 $1.37 billion $2.17 15.54

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

Dividends

POSCO pays an annual dividend of $0.55 per share and has a dividend yield of 0.7%. Steel Dynamics pays an annual dividend of $0.62 per share and has a dividend yield of 1.8%. POSCO pays out 11.1% of its earnings in the form of a dividend. Steel Dynamics pays out 28.6% 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.

Profitability

This table compares POSCO and Steel Dynamics’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
POSCO 3.31% 3.97% 2.48%
Steel Dynamics 6.07% 21.75% 9.34%

Risk and Volatility

POSCO has a beta of 1.13, indicating that its share price is 13% more volatile than the S&P 500. Comparatively, Steel Dynamics has a beta of 1.23, indicating that its share price is 23% more volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of current ratings and recommmendations for POSCO and Steel Dynamics, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
POSCO 0 2 3 0 2.60
Steel Dynamics 0 2 13 0 2.87

Steel Dynamics has a consensus price target of $42.31, suggesting a potential upside of 25.43%. Given Steel Dynamics’ stronger consensus rating and higher possible upside, analysts plainly believe Steel Dynamics is more favorable than POSCO.

Institutional & Insider Ownership

6.0% of POSCO shares are owned by institutional investors. Comparatively, 85.6% of Steel Dynamics shares are owned by institutional investors. 0.0% of POSCO shares are owned by insiders. Comparatively, 4.2% of Steel Dynamics shares are owned by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Summary

Steel Dynamics beats POSCO on 12 of the 16 factors compared between the two stocks.

POSCO Company Profile

POSCO is a Korea-based company principally engaged in the manufacture and distribution of steel products. The Company operates in four segments: steel, trading, construction, and others. The steel segment includes production of steel products and sale of such products. The trading segment consists of global trading activities of POSCO Daewoo Corporation, exporting and importing a range of steel products that are both obtained from and supplied to it, as well as between other suppliers and purchasers in Korea and overseas. The construction segment includes planning, designing and construction of industrial plants, civil engineering projects, and commercial and residential buildings, both in Korea and overseas. The others segment includes power generation, liquefied natural gas (LNG) logistics, and network and system integration.

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.

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