Critical Analysis: Element Solutions (NYSE:ESI) and Westaim (OTCMKTS:WEDXF)

Westaim (OTCMKTS:WEDXF) and Element Solutions (NYSE:ESI) are both basic materials companies, but which is the superior business? We will compare the two businesses based on the strength of their institutional ownership, earnings, dividends, analyst recommendations, valuation, risk and profitability.

Volatility and Risk

Westaim has a beta of 0.22, indicating that its stock price is 78% less volatile than the S&P 500. Comparatively, Element Solutions has a beta of 1.33, indicating that its stock price is 33% more volatile than the S&P 500.

Earnings & Valuation

This table compares Westaim and Element Solutions”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Westaim	$17.04 million	35.36	-$16.18 million	($1.69)	-10.63
Element Solutions	$2.46 billion	2.59	$244.20 million	$0.99	26.51

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

Profitability

This table compares Westaim and Element Solutions’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Westaim	-123.33%	-7.27%	-6.46%
Element Solutions	9.58%	14.01%	7.28%

Institutional & Insider Ownership

92.3% of Element Solutions shares are held by institutional investors. 4.2% of Westaim shares are held by company insiders. Comparatively, 6.9% of Element Solutions 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.

Analyst Recommendations

This is a breakdown of current recommendations for Westaim and Element Solutions, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Westaim	0	0	0	0	0.00
Element Solutions	0	2	7	1	2.90

Element Solutions has a consensus price target of $30.75, suggesting a potential upside of 17.17%. Given Element Solutions’ stronger consensus rating and higher probable upside, analysts plainly believe Element Solutions is more favorable than Westaim.

Summary

Element Solutions beats Westaim on 14 of the 15 factors compared between the two stocks.

About Westaim

The Westaim Corporation is a private equity firm specializing in direct and indirect investments through acquisitions, joint ventures, secondary investments both direct and indirect, fund of fund investments, and other arrangements. For direct investments, the firm invests in early venture, mid venture, late venture, middle market, later stage, mature, emerging growth, PIPEs, and buyout transactions. For fund of fund investments, it seeks to invest in private equity funds, venture capital funds, and hedge funds. The firm seeks to provide long term capital to businesses operating in the global financial services industry. It typically acquires controlling interests in businesses. The firm seeks to acquire debt, equity, or derivative securities of both public and private companies. It invests with the objective of providing its shareholders with capital appreciation and real wealth preservation. The firm seeks to provide its portfolio companies with advisory services including, but not limited to, advice on capital allocation, financing strategy, performance measurement and merger and acquisition support. It also seeks to partner with like-minded providers of third party capital to help supplement the firm's own capital, when completing acquisitions. The firm generally seeks to hold its investments for seven to 15 years. The Westaim Corporation was founded in 1996 and is based in Toronto, Canada.

About Element Solutions

Element Solutions Inc operates as a specialty chemicals company in the United States, China, and internationally. The company operates in two segments, Electronics, and Industrial & Specialty. The Electronics segment researches, formulates, and sells specialty chemicals and materials for various types of electronics hardware products. This segment also supplies surface mount technologies, fluxes, thermal management material, coatings, and other attachment materials; chemical formulations to the electronics industry; and advanced copper interconnects, die attachment, sintered silver material, adhesives, wafer bump processes, and photomask technologies for semiconductor industry. It primarily serves mobile communications, computers, automobiles, and aerospace equipment industries. The Industrial & Specialty segment provides industrial solutions, which include chemical systems that protect and decorate metal and plastic surfaces; consumable chemicals that enable printing image transfer on flexible packaging materials; and chemistries used in water-based hydraulic control fluids for offshore energy production applications. It serves aerospace, automotive, construction, consumer electronics, consumer packaged goods, and oil and gas production end markets. The company was formerly known as Platform Specialty Products Corporation and changed its name to Element Solutions Inc in January 2019. Element Solutions Inc was founded in 1785 and is headquartered in Fort Lauderdale, Florida.