A Schulman (NASDAQ: SHLM) and NewMarket (NYSE:NEU) are both basic materials companies, but which is the superior stock? We will compare the two businesses based on the strength of their earnings, risk, valuation, profitability, dividends, analyst recommendations and institutional ownership.
A Schulman pays an annual dividend of $0.82 per share and has a dividend yield of 2.3%. NewMarket pays an annual dividend of $7.00 per share and has a dividend yield of 1.8%. A Schulman pays out 65.1% of its earnings in the form of a dividend. NewMarket pays out 43.6% 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. A Schulman has raised its dividend for 9 consecutive years. A Schulman is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.
This table compares A Schulman and NewMarket’s gross revenue, earnings per share and valuation.
|Gross Revenue||Price/Sales Ratio||Net Income||Earnings Per Share||Price/Earnings Ratio|
|A Schulman||$2.46 billion||0.43||$33.02 million||$1.26||28.21|
|NewMarket||$2.20 billion||2.10||$243.44 million||$16.07||24.20|
NewMarket has lower revenue, but higher earnings than A Schulman. NewMarket is trading at a lower price-to-earnings ratio than A Schulman, indicating that it is currently the more affordable of the two stocks.
This table compares A Schulman and NewMarket’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
Institutional and Insider Ownership
78.7% of A Schulman shares are owned by institutional investors. Comparatively, 58.6% of NewMarket shares are owned by institutional investors. 4.1% of A Schulman shares are owned by insiders. Comparatively, 16.8% of NewMarket shares are owned by 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.
Risk and Volatility
A Schulman has a beta of 1.52, indicating that its share price is 52% more volatile than the S&P 500. Comparatively, NewMarket has a beta of 0.81, indicating that its share price is 19% less volatile than the S&P 500.
This is a breakdown of recent recommendations and price targets for A Schulman and NewMarket, as provided by MarketBeat.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
A Schulman presently has a consensus price target of $37.00, suggesting a potential upside of 4.08%. Given A Schulman’s higher probable upside, research analysts clearly believe A Schulman is more favorable than NewMarket.
About A Schulman
A. Schulman, Inc. is an international supplier of plastic formulations, resins and services, and provides solutions to its customers’ requirements through custom-formulated products. The Company’s customers span a range of markets, such as packaging, mobility, building and construction, electronics and electrical, agriculture, personal care and hygiene, custom services, and sports, home and leisure. The Company’s segments include Europe, Middle East and Africa (EMEA), the United States and Canada (USCAN), Latin America (LATAM), Asia Pacific (APAC) and Engineered Composites (EC). As of August 31, 2016, the Company operated in six product families, including custom performance colors (CPC), engineered composites, Masterbatch solutions, engineered plastics, specialty powders and distribution services. The CPC product family offers powdered, pelletized and liquid color concentrates that are custom-designed for thermoplastic resins.
NewMarket Corporation is a holding company. The Company is the parent company of Afton Chemical Corporation (Afton), Ethyl Corporation (Ethyl), NewMarket Services Corporation (NewMarket Services), and NewMarket Development Corporation (NewMarket Development). The Company operates through petroleum additives segment, which is primarily represented by Afton. The Company manufactures chemical components that are selected to perform one or more specific functions and combine those chemicals with other chemicals or components to form additive packages for use in specified end user applications. The petroleum additives product applications include lubricant additives and fuel additives. The Company’s All other category includes the operations of the TEL business, as well as contract manufacturing and services performed by Ethyl. The Ethyl plant facility is located in Houston, Texas. It is involved in terminal operations related to TEL and other fuel additives.
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