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

Profitability

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

Net Margins Return on Equity Return on Assets
Steel Dynamics 6.07% 21.75% 9.34%
Commercial Metals 1.57% 7.84% 3.42%

Analyst Recommendations

This is a breakdown of recent ratings for Steel Dynamics and Commercial Metals, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Steel Dynamics 0 5 10 0 2.67
Commercial Metals 2 3 3 0 2.13

Steel Dynamics currently has a consensus target price of $41.07, indicating a potential upside of 15.24%. Commercial Metals has a consensus target price of $20.63, indicating a potential upside of 7.81%. Given Steel Dynamics’ stronger consensus rating and higher possible upside, equities research analysts clearly believe Steel Dynamics is more favorable than Commercial Metals.

Valuation and Earnings

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

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Steel Dynamics $8.77 billion 0.97 $1.37 billion $2.17 16.42
Commercial Metals $4.82 billion 0.46 $306.06 million $0.65 29.43

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

Dividends

Steel Dynamics pays an annual dividend of $0.62 per share and has a dividend yield of 1.7%. Commercial Metals pays an annual dividend of $0.48 per share and has a dividend yield of 2.5%. Steel Dynamics pays out 28.6% of its earnings in the form of a dividend. Commercial Metals pays out 73.8% 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.

Insider & Institutional Ownership

82.6% of Steel Dynamics shares are owned by institutional investors. Comparatively, 90.6% of Commercial Metals shares are owned by institutional investors. 4.2% of Steel Dynamics shares are owned by insiders. Comparatively, 1.3% of Commercial Metals shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.

Risk & Volatility

Steel Dynamics has a beta of 1.29, indicating that its share price is 29% more volatile than the S&P 500. Comparatively, Commercial Metals has a beta of 1.22, indicating that its share price is 22% more volatile than the S&P 500.

Summary

Steel Dynamics beats Commercial Metals on 13 of the 16 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.

Commercial Metals Company Profile

Commercial Metals Company, together with its subsidiaries, manufactures, recycles and markets steel and metal products, related materials and services through a network. The Company’s Americas Recycling segment processes scrap metals for use as a raw material by manufacturers of new metal products. The Americas Mills segment consists of steel mills, commonly referred to as minimills that produce reinforcing bar (rebar), angles, flats and rounds. Its Americas Fabrication segment consists of its steel fabrication facilities that bend, weld, cut and fabricate steel, primarily rebar. Its International Mill segment consists of its mill, recycling and fabrication operations located in Poland. Its International Marketing and Distribution segment includes international operations for the sales, distribution and processing of primary and secondary metals, fabricated metals, semi-finished, long and flat steel products, and other industrial products.

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