Commercial Metals (NYSE: CMC) and Nucor Corporation (NYSE:NUE) are both mid-cap basic materials companies, but which is the superior stock? We will contrast the two businesses based on the strength of their valuation, risk, dividends, institutional ownership, analyst recommendations, profitability and earnings.

Profitability

This table compares Commercial Metals and Nucor Corporation’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Commercial Metals 1.57% 7.84% 3.42%
Nucor Corporation 6.08% 13.39% 7.20%

Volatility & Risk

Commercial Metals has a beta of 1.22, indicating that its share price is 22% more volatile than the S&P 500. Comparatively, Nucor Corporation has a beta of 1.54, indicating that its share price is 54% more volatile than the S&P 500.

Institutional & Insider Ownership

90.6% of Commercial Metals shares are owned by institutional investors. Comparatively, 74.9% of Nucor Corporation shares are owned by institutional investors. 1.3% of Commercial Metals shares are owned by company insiders. Comparatively, 0.7% of Nucor Corporation shares are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.

Analyst Recommendations

This is a breakdown of current recommendations and price targets for Commercial Metals and Nucor Corporation, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Commercial Metals 2 3 3 0 2.13
Nucor Corporation 0 6 9 0 2.60

Commercial Metals currently has a consensus price target of $20.63, suggesting a potential upside of 9.24%. Nucor Corporation has a consensus price target of $67.24, suggesting a potential upside of 19.74%. Given Nucor Corporation’s stronger consensus rating and higher probable upside, analysts plainly believe Nucor Corporation is more favorable than Commercial Metals.

Dividends

Commercial Metals pays an annual dividend of $0.48 per share and has a dividend yield of 2.5%. Nucor Corporation pays an annual dividend of $1.51 per share and has a dividend yield of 2.7%. Commercial Metals pays out 73.8% of its earnings in the form of a dividend. Nucor Corporation pays out 43.8% 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. Nucor Corporation has increased its dividend for 43 consecutive years. Nucor Corporation is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Earnings and Valuation

This table compares Commercial Metals and Nucor Corporation’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Commercial Metals $4.82 billion 0.45 $306.06 million $0.65 29.05
Nucor Corporation $18.24 billion 0.98 $2.67 billion $3.45 16.28

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

Summary

Nucor Corporation beats Commercial Metals on 14 of the 17 factors compared between the two stocks.

About Commercial Metals

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.

About Nucor Corporation

Nucor Corporation (Nucor) manufactures steel and steel products. The Company produces direct reduced iron (DRI) for use in its steel mills. It operates in three segments: steel mills, steel products and raw materials. The steel mills segment produces and distributes sheet steel (hot-rolled, cold-rolled and galvanized), plate steel, structural steel (wide-flange beams, beam blanks, H-piling and sheet piling) and bar steel (blooms, billets, concrete reinforcing bar, merchant bar, wire rod and special bar quality). The steel products segment produces steel joists and joist girders, steel deck, fabricated concrete reinforcing steel and cold finished steel. The raw materials produces DRI; brokers ferrous and nonferrous metals, pig iron, HBI and DRI; supplies ferro-alloys, and processes ferrous and nonferrous scrap metal. It also processes ferrous and nonferrous metals and brokers ferrous and nonferrous metals, pig iron, hot briquetted iron (HBI) and DRI.

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