FMC (NYSE: FMC) and Dow Chemical (NYSE:DWDP) are both large-cap basic materials companies, but which is the better investment? We will contrast the two businesses based on the strength of their earnings, profitability, dividends, risk, valuation, analyst recommendations and institutional ownership.

Insider & Institutional Ownership

89.3% of FMC shares are held by institutional investors. Comparatively, 68.8% of Dow Chemical shares are held by institutional investors. 1.1% of FMC shares are held by company insiders. Comparatively, 0.9% of Dow Chemical shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Profitability

This table compares FMC and Dow Chemical’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
FMC 0.78% 16.77% 5.57%
Dow Chemical 5.01% 9.73% 4.18%

Analyst Ratings

This is a summary of recent ratings and price targets for FMC and Dow Chemical, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
FMC 0 7 12 0 2.63
Dow Chemical 1 3 18 0 2.77

FMC presently has a consensus target price of $93.89, suggesting a potential upside of 2.65%. Dow Chemical has a consensus target price of $79.61, suggesting a potential upside of 10.37%. Given Dow Chemical’s stronger consensus rating and higher possible upside, analysts clearly believe Dow Chemical is more favorable than FMC.

Valuation and Earnings

This table compares FMC and Dow Chemical’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
FMC $3.28 billion 3.74 $209.10 million $0.17 538.06
Dow Chemical $48.16 billion 3.50 $4.32 billion $2.08 34.68

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

Volatility and Risk

FMC has a beta of 1.61, indicating that its stock price is 61% more volatile than the S&P 500. Comparatively, Dow Chemical has a beta of 1.15, indicating that its stock price is 15% more volatile than the S&P 500.

Dividends

FMC pays an annual dividend of $0.66 per share and has a dividend yield of 0.7%. Dow Chemical pays an annual dividend of $1.52 per share and has a dividend yield of 2.1%. FMC pays out 388.2% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Dow Chemical pays out 73.1% of its earnings in the form of a dividend. Dow Chemical has raised its dividend for 6 consecutive years. Dow Chemical is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

Dow Chemical beats FMC on 10 of the 17 factors compared between the two stocks.

FMC Company Profile

FMC Corporation is a diversified chemical company serving agricultural, consumer and industrial markets. The Company operates in three business segments: FMC Agricultural Solutions, FMC Health and Nutrition, and FMC Lithium. As of December 31, 2016, the FMC Agricultural Solutions segment developed, marketed and sold three classes of crop protection chemicals: insecticides, herbicides and fungicides. The Company’s FMC Agricultural Solutions segment operates in the agrochemicals industry. This segment develops, manufactures and sells a portfolio of professional pest control, and lawn and garden products. The FMC Health and Nutrition segment focuses on nutritional ingredients, health excipients and functional health ingredients. The Company’s FMC Health and Nutrition segment focuses on food ingredients, pharmaceutical excipients and omega-3 oils. The Company’s FMC Lithium segment manufactures lithium for use in a range of lithium products.

Dow Chemical Company Profile

DowDuPont Inc. is a holding company formed through the merger of equals between The Dow Chemical Company and E. I. du Pont de Nemours and Company (DuPont). The Company’s business divisions include Agriculture division, Material Science division, and a Specialty Products division. The Agriculture Division offers a complete portfolio of products and technologies, traits and crop protection. The Materials Science Division provides solutions, such as packaging, transportation, infrastructure and customer care. The Specialty Products division provides solution for industrial, safety, energy, food, nutrition, construction, electronics and consumer goods industries. The company provides solutions to a range of markets, including aerospace, automotive, consumer electronics, military, printing, renewable energy, semiconductors, child nutrition, dietary supplements, carpet and apparel, fertilizer, and oil and gas/energy.

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