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

Institutional and Insider Ownership

5.3% of Gerdau shares are owned by institutional investors. Comparatively, 82.9% of Steel Dynamics shares are owned by institutional investors. 0.0% of Gerdau shares are owned by insiders. Comparatively, 4.2% of Steel Dynamics shares are owned by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Dividends

Gerdau pays an annual dividend of $0.01 per share and has a dividend yield of 0.3%. Steel Dynamics pays an annual dividend of $0.62 per share and has a dividend yield of 1.6%. Gerdau pays out -3.2% 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.

Earnings and Valuation

This table compares Gerdau and Steel Dynamics’ top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Gerdau $10.98 billion 0.52 $1.13 billion ($0.31) -10.87
Steel Dynamics $8.77 billion 1.03 $1.37 billion $2.17 17.39

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

Volatility & Risk

Gerdau has a beta of 2.31, meaning that its stock price is 131% more volatile than the S&P 500. Comparatively, Steel Dynamics has a beta of 1.29, meaning that its stock price is 29% more volatile than the S&P 500.

Profitability

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

Net Margins Return on Equity Return on Assets
Gerdau -5.73% 3.47% 1.61%
Steel Dynamics 5.79% 21.45% 9.25%

Analyst Recommendations

This is a summary of current ratings and price targets for Gerdau and Steel Dynamics, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Gerdau 0 2 4 0 2.67
Steel Dynamics 0 5 11 0 2.69

Steel Dynamics has a consensus target price of $41.53, indicating a potential upside of 10.05%. Given Steel Dynamics’ stronger consensus rating and higher probable upside, analysts plainly believe Steel Dynamics is more favorable than Gerdau.

Summary

Steel Dynamics beats Gerdau on 12 of the 15 factors compared between the two stocks.

About Gerdau

Gerdau S.A. (Gerdau) is a manufacturer of long steel in the North and South America. The Company is engaged in the production and commercialization of steel products in general, through its mills located in Argentina, Brazil, Canada, Chile, Colombia, Spain, the United States, Guatemala, India, Mexico, Peru, the Dominican Republic, Uruguay and Venezuela. Its segments are Brazil Operations, which includes operations of steel and iron ore in Brazil, except Special Steels, and the operation of metallurgical coal and coke in Colombia; North America Operations, which includes all operations in North America, except those of Mexico and Special Steels; South America Operations, which includes operations in South America, except Brazil and the operation of metallurgical coal and coke in Colombia, and Special Steel Operations, including special steel operations in Brazil, Spain, the United States and India. It supplies its customers a range of products, including iron ore semi-finished products.

About Steel Dynamics

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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