Arkema (OTCMKTS:ARKAY) versus Valhi (NYSE:VHI) Financial Analysis

Arkema (OTCMKTS:ARKAY) and Valhi (NYSE:VHI) are both basic materials companies, but which is the superior investment? We will contrast the two companies based on the strength of their dividends, analyst recommendations, earnings, institutional ownership, valuation, profitability and risk.

Insider & Institutional Ownership

3.8% of Valhi shares are held by institutional investors. 0.2% of Valhi shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company will outperform the market over the long term.

Dividends

Arkema pays an annual dividend of $3.02 per share and has a dividend yield of 4.9%. Valhi pays an annual dividend of $0.32 per share and has a dividend yield of 2.5%. Arkema pays out 145.2% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Valhi pays out 50.0% of its earnings in the form of a dividend.

Analyst Recommendations

This is a breakdown of current recommendations for Arkema and Valhi, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Arkema	2	2	1	0	1.80
Valhi	2	0	0	0	1.00

Valhi has a consensus price target of $12.00, suggesting a potential downside of 5.36%. Given Valhi’s higher possible upside, analysts clearly believe Valhi is more favorable than Arkema.

Risk and Volatility

Arkema has a beta of 1.01, meaning that its stock price is 1% more volatile than the S&P 500. Comparatively, Valhi has a beta of 1.18, meaning that its stock price is 18% more volatile than the S&P 500.

Valuation and Earnings

This table compares Arkema and Valhi”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Arkema	$10.33 billion	0.45	$383.06 million	$2.08	29.40
Valhi	$2.06 billion	0.17	$108.00 million	$0.64	19.81

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

Profitability

This table compares Arkema and Valhi’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Arkema	2.41%	6.36%	3.31%
Valhi	4.69%	7.02%	3.53%

About Arkema

Arkema S.A. manufactures and sells specialty chemicals and advanced materials worldwide. The company operates in three segments: Adhesive Solutions, Advanced Materials and Coating Solutions, and Intermediates. The Adhesive Solutions segment provides solutions for construction, renovation of buildings, DIY, durable goods, and packaging and non-woven applications; and supplies technologies used in building activities for businesses and individuals, including sealants, tiles, flooring adhesives and waterproofing systems, and technologies used in industry, which include automotive, textiles, glazing, flexible and rigid packaging, and hygiene markets. This segment also offers performance polymers, such as specialty polyamides, PVDF, polyimides, fluorospecialties, and polyetherketoneketone; and performance additives which includes molecular sieves, organic peroxides, thiochemicals, and hydrogen peroxide. The Advance Materials and Coating Solutions segment offers coating solutions, including comprising EU/US acrylics and coating resins; coating additives, such as sartomer photocure resins and coatex rheology additives. This segment also provides decorative paints, industrial coatings, and adhesives; and solutions for applications in the paper, superabsorbent, water treatment and oil and gas extraction, and 3D printing and electronics industries. The Intermediates segment provides fluorogases and acrylics; and industrial intermediate chemicals used in construction, refrigeration and air conditioning, automotive, coatings, and water treatment sectors. Arkema S.A. was incorporated in 2003 and is headquartered in Colombes, France.

About Valhi

Valhi, Inc. engages in the chemicals, component products, and real estate management and development businesses in Europe, North America, the Asia Pacific, and internationally. The company’s Chemicals segment produces and markets titanium dioxide pigments (TiO2), which are white inorganic pigments used in various applications by paint, plastics, decorative laminate, and paper manufacturers. It offers TiO2 under the KRONOS name through agents and distributors. The company’s Component Products segment manufactures mechanical and electrical cabinet locks, and other locking mechanisms for use in ignition systems, mailboxes, file cabinets, desk drawers, tool storage cabinets, vending and cash containment machines, integrated inventory and access control secured narcotics boxes, medical cabinetry security, electronic circuit panels, storage compartments, and gas station security applications. It also provides stainless steel exhaust components, gauges, throttle controls, wake enhancement systems, trim tabs, and related hardware and accessories primarily for performance and ski/wakeboard boats. The company’s Real Estate Management and Development segment offers utility services to industrial and municipal customers; owns real properties; and develops land holdings for commercial, industrial, and residential purposes. It also holds marketable securities and other investments. The company was incorporated in 1932 and is based in Dallas, Texas. Valhi, Inc. is a subsidiary of Dixie Rice Agricultural L.L.C.