Valhi (NYSE:VHI) & Koppers (NYSE:KOP) Critical Review

Koppers (NYSE:KOP) and Valhi (NYSE:VHI) are both small-cap basic materials companies, but which is the better stock? We will contrast the two companies based on the strength of their risk, dividends, valuation, institutional ownership, profitability, earnings and analyst recommendations.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Koppers	0.84%	16.48%	4.46%
Valhi	0.89%	2.22%	1.13%

Institutional & Insider Ownership

92.8% of Koppers shares are held by institutional investors. Comparatively, 3.8% of Valhi shares are held by institutional investors. 6.9% of Koppers shares are held by insiders. Comparatively, 0.2% of Valhi shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Dividends

Koppers pays an annual dividend of $0.32 per share and has a dividend yield of 1.1%. Valhi pays an annual dividend of $0.32 per share and has a dividend yield of 2.5%. Koppers pays out 40.0% of its earnings in the form of a dividend. Valhi pays out 50.0% 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. Koppers has raised its dividend for 2 consecutive years.

Earnings and Valuation

This table compares Koppers and Valhi”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Koppers	$2.09 billion	0.27	$52.40 million	$0.80	36.49
Valhi	$2.06 billion	0.18	$108.00 million	$0.64	20.22

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

Risk & Volatility

Koppers has a beta of 1.4, suggesting that its share price is 40% more volatile than the S&P 500. Comparatively, Valhi has a beta of 1.17, suggesting that its share price is 17% more volatile than the S&P 500.

Analyst Ratings

This is a breakdown of recent ratings and recommmendations for Koppers and Valhi, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Koppers	0	2	2	0	2.50
Valhi	2	0	0	0	1.00

Koppers currently has a consensus target price of $52.50, indicating a potential upside of 79.87%. Valhi has a consensus target price of $12.00, indicating a potential downside of 7.26%. Given Koppers’ stronger consensus rating and higher possible upside, equities research analysts plainly believe Koppers is more favorable than Valhi.

Summary

Koppers beats Valhi on 14 of the 17 factors compared between the two stocks.

About Koppers

Koppers Holdings Inc. provides treated wood products, wood preservation chemicals, and carbon compounds in the United States, Australasia, Europe, and internationally. The company operates through Railroad and Utility Products and Services (RUPS), Performance Chemicals (PC), and Carbon Materials and Chemicals (CMC) segments. The RUPS segment procures and treats crossties, switch ties, and various types of lumber used for railroad bridges and crossings. It also provides rail joint bars to join rails together for railroads; transmission and distribution poles for electric and telephone utilities; and pilings. This segment provides railroad services, such as engineering, design, repair, and inspection services for railroad bridges. The PC segment develops, manufactures, and markets copper-based wood preservatives, including micronized copper azole, micronized pigments, alkaline copper quaternary, amine copper azole, and chromated copper arsenate for decking, fencing, utility poles, construction lumber and timbers, and various agricultural uses; and supplies fire-retardant chemicals for pressure treatment of wood primarily in commercial construction. The CMC segment manufactures creosote for the treatment of wood or as a feedstock in the production of carbon black; carbon pitch, a raw material used in the production of aluminum and steel; naphthalene for use as a feedstock in the production of phthalic anhydride and as a surfactant in the production of concrete; phthalic anhydride for the production of plasticizers, polyester resins, and alkyd paints; and carbon black feedstock for use in the production of carbon black. It serves the railroad, specialty chemical, utility, residential lumber, agriculture, aluminum, steel, rubber, and construction sectors. Koppers Holdings Inc. was founded in 1988 and is based in Pittsburgh, Pennsylvania.

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.