Critical Review: Cleveland-Cliffs (CLF) vs. Carpenter Technology (CRS)

Cleveland-Cliffs (NYSE: CLF) and Carpenter Technology (NYSE:CRS) 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 profitability, valuation, institutional ownership, risk, dividends, earnings and analyst recommendations.

Analyst Ratings

This is a summary of current ratings and recommmendations for Cleveland-Cliffs and Carpenter Technology, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Cleveland-Cliffs 2 4 3 0 2.11
Carpenter Technology 0 2 3 0 2.60

Cleveland-Cliffs presently has a consensus price target of $8.83, indicating a potential upside of 9.87%. Carpenter Technology has a consensus price target of $49.50, indicating a potential downside of 7.68%. Given Cleveland-Cliffs’ higher possible upside, analysts clearly believe Cleveland-Cliffs is more favorable than Carpenter Technology.

Dividends

Carpenter Technology pays an annual dividend of $0.72 per share and has a dividend yield of 1.3%. Cleveland-Cliffs does not pay a dividend. Carpenter Technology pays out 44.4% of its earnings in the form of a dividend.

Insider & Institutional Ownership

56.7% of Cleveland-Cliffs shares are held by institutional investors. Comparatively, 95.9% of Carpenter Technology shares are held by institutional investors. 0.5% of Cleveland-Cliffs shares are held by company insiders. Comparatively, 4.5% of Carpenter Technology shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Volatility and Risk

Cleveland-Cliffs has a beta of 1.61, indicating that its share price is 61% more volatile than the S&P 500. Comparatively, Carpenter Technology has a beta of 2.08, indicating that its share price is 108% more volatile than the S&P 500.

Earnings & Valuation

This table compares Cleveland-Cliffs and Carpenter Technology’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Cleveland-Cliffs $2.11 billion 1.14 $174.10 million $0.64 12.70
Carpenter Technology $1.80 billion 1.40 $47.00 million $1.62 33.10

Cleveland-Cliffs has higher revenue and earnings than Carpenter Technology. Cleveland-Cliffs is trading at a lower price-to-earnings ratio than Carpenter Technology, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Cleveland-Cliffs and Carpenter Technology’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Cleveland-Cliffs 5.48% -29.06% 13.16%
Carpenter Technology 4.06% 6.67% 2.77%

Summary

Carpenter Technology beats Cleveland-Cliffs on 9 of the 15 factors compared between the two stocks.

About Cleveland-Cliffs

Cleveland-Cliffs Inc, formerly Cliffs Natural Resources Inc., is a mining and natural resources company. The Company is a supplier of iron ore pellets to the North American steel industry from its mines and pellet plants located in Michigan and Minnesota. The Company’s segments include U.S. Iron Ore and Asia Pacific Iron Ore. The Company is a producer of iron ore pellets, primarily selling production from U.S. Iron Ore to integrated steel companies in the United States, Canada and Mexico. Its Asia Pacific Iron Ore operations are located in Western Australia and consist of its Koolyanobbing operation. The Koolyanobbing operations serve the Asian iron ore markets with direct-shipped fines and lump ore. In addition, the Company operates an iron ore mining complex in Western Australia. In the United States, the Company owned four operational iron ore mines and one indefinitely idled mine.

About Carpenter Technology

Carpenter Technology Corporation is engaged in the manufacturing, fabrication and distribution of specialty metals. The Company’s segments include Specialty Alloys Operations (SAO) and Performance Engineered Products (PEP). Its SAO segment consists of alloy and stainless steel manufacturing operations. Its PEP segment includes the Dynamet titanium business, the Carpenter Powder Products business, the Amega West business, the Specialty Steel Supply business and the Latrobe and Mexico distribution businesses. It develops, manufactures and distributes cast/wrought and powder metal stainless steels, and special alloys, including high temperature (iron-nickel-cobalt base), stainless, corrosion resistant, controlled expansion alloys, ultra-high strength and implantable alloys, tool and die steels and other specialty metals, as well as cast/wrought titanium alloys. The Company manufactures and rents down-hole drilling tools and components used in the oil and gas industry.

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