KMG Chemicals (NYSE: KMG) and OMNOVA Solutions (NYSE:OMN) are both small-cap basic materials companies, but which is the better stock? We will contrast the two companies based on the strength of their valuation, analyst recommendations, risk, earnings, institutional ownership, profitability and dividends.

Volatility and Risk

KMG Chemicals has a beta of 0.59, meaning that its share price is 41% less volatile than the S&P 500. Comparatively, OMNOVA Solutions has a beta of 2.1, meaning that its share price is 110% more volatile than the S&P 500.

Dividends

KMG Chemicals pays an annual dividend of $0.12 per share and has a dividend yield of 0.3%. OMNOVA Solutions does not pay a dividend. KMG Chemicals pays out 6.7% of its earnings in the form of a dividend.

Insider & Institutional Ownership

73.7% of KMG Chemicals shares are held by institutional investors. Comparatively, 88.0% of OMNOVA Solutions shares are held by institutional investors. 6.9% of KMG Chemicals shares are held by insiders. Comparatively, 4.8% of OMNOVA Solutions shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company will outperform the market over the long term.

Profitability

This table compares KMG Chemicals and OMNOVA Solutions’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
KMG Chemicals 7.05% 15.66% 9.75%
OMNOVA Solutions -1.19% 18.52% 2.97%

Valuation & Earnings

This table compares KMG Chemicals and OMNOVA Solutions’ gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
KMG Chemicals $312.48 million 1.82 $51.47 million $1.80 26.55
OMNOVA Solutions $778.50 million 0.51 $82.20 million ($0.21) -42.38

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

Analyst Ratings

This is a breakdown of current recommendations for KMG Chemicals and OMNOVA Solutions, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
KMG Chemicals 0 0 1 0 3.00
OMNOVA Solutions 0 1 2 0 2.67

KMG Chemicals presently has a consensus target price of $37.00, indicating a potential downside of 22.58%. OMNOVA Solutions has a consensus target price of $12.00, indicating a potential upside of 34.83%. Given OMNOVA Solutions’ higher probable upside, analysts clearly believe OMNOVA Solutions is more favorable than KMG Chemicals.

KMG Chemicals Company Profile

KMG Chemicals, Inc. manufactures, formulates and globally distributes specialty chemicals. The Company operates businesses selling electronic chemicals, industrial wood treating chemicals, and industrial valve lubricants and sealants. The Company operates through two segments: Electronic chemicals and Other chemicals. The Company operates through its subsidiaries, KMG Electronic Chemicals, Inc. (KMG EC), KMG-Bernuth, Inc. (KMG Bernuth) and KMG Val-Tex, LLC (Val-Tex). The Company’s Electronic chemicals business sells high purity and ultra-purity wet process chemicals primarily to the semiconductor industry. The Company’s Other chemicals segment includes its industrial lubricants business and wood treating chemicals business. The Company’s products sulfuric, phosphoric, nitric and hydrofluoric acids, ammonium hydroxide, hydrogen peroxide, isopropyl alcohol, other specialty organic solvents and various blends of chemicals.

OMNOVA Solutions Company Profile

OMNOVA Solutions Inc. is a provider of emulsion polymers, specialty chemicals and engineered surfaces for commercial, industrial and residential end uses. The Company’s segments include Performance Chemicals and Engineered Surfaces. The Performance Chemicals segment produces a range of emulsion polymers and specialty chemicals based on styrene butadiene, styrene butadiene acrylonitrile, styrene butadiene vinyl pyridine, nitrile butadiene, polyvinyl acetate, acrylic, styrene acrylic, vinyl acrylic, glyoxal, fluorochemical and bio-based chemistries. The Engineered Surfaces segment develops, designs, produces and markets a line of functional and decorative surfacing products, including coated fabrics, vinyl, paper, and specialty laminates and industrial films. The Performance Chemicals segment includes two product lines: Performance Materials and Specialty Chemicals, and the Engineered Surfaces segment includes two product lines: Coated Fabrics, and Laminates and Performance Films.

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