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

Risk and Volatility

PolyOne has a beta of 1.83, suggesting that its share price is 83% more volatile than the S&P 500. Comparatively, Dow Chemical has a beta of 1.15, suggesting that its share price is 15% more volatile than the S&P 500.

Institutional and Insider Ownership

93.8% of PolyOne shares are held by institutional investors. Comparatively, 68.8% of Dow Chemical shares are held by institutional investors. 1.6% of PolyOne shares are held by insiders. Comparatively, 0.9% of Dow Chemical shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Analyst Recommendations

This is a summary of current ratings and recommmendations for PolyOne and Dow Chemical, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
PolyOne 0 1 5 0 2.83
Dow Chemical 1 3 18 0 2.77

PolyOne presently has a consensus price target of $43.17, suggesting a potential downside of 3.08%. Dow Chemical has a consensus price target of $79.61, suggesting a potential upside of 12.00%. Given Dow Chemical’s higher possible upside, analysts plainly believe Dow Chemical is more favorable than PolyOne.

Profitability

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

Net Margins Return on Equity Return on Assets
PolyOne -1.87% 27.77% 6.61%
Dow Chemical 5.01% 9.73% 4.18%

Earnings and Valuation

This table compares PolyOne and Dow Chemical’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
PolyOne $3.34 billion 1.08 $165.20 million ($0.76) -58.60
Dow Chemical $48.16 billion 3.45 $4.32 billion $2.08 34.17

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

Dividends

PolyOne pays an annual dividend of $0.54 per share and has a dividend yield of 1.2%. Dow Chemical pays an annual dividend of $1.52 per share and has a dividend yield of 2.1%. PolyOne pays out -71.1% of its earnings in the form of a dividend. Dow Chemical pays out 73.1% 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. PolyOne has increased its dividend for 5 consecutive years.

Summary

PolyOne beats Dow Chemical on 9 of the 17 factors compared between the two stocks.

About PolyOne

PolyOne Corporation (PolyOne) provides specialized polymer materials, services and solutions. The Company’s segments include Color, Additives and Inks; Specialty Engineered Materials; Performance Products and Solutions, and PolyOne Distribution. The Color, Additives and Inks segment provides custom color and additive concentrates in solid and liquid form for thermoplastics, dispersions for thermosets. The Specialty Engineered Materials segment provides specialty polymer formulations, services and solutions for designers, assemblers and processors of thermoplastic materials. The Performance Products and Solutions segment consists of the Geon Performance Materials and Producer Services business units. As of December 31, 2016, the PolyOne Distribution segment distributed more than 4,000 grades of engineering and commodity grade resins.

About Dow Chemical

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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