Brenntag (OTCMKTS:BNTGY) versus Innospec (NASDAQ:IOSP) Critical Analysis

Brenntag (OTCMKTS:BNTGY) and Innospec (NASDAQ:IOSP) are both mid-cap basic materials companies, but which is the superior business? We will compare the two businesses based on the strength of their profitability, dividends, institutional ownership, analyst recommendations, valuation, earnings and risk.

Analyst Ratings

This is a breakdown of current recommendations and price targets for Brenntag and Innospec, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Brenntag	3	6	0	0	1.67
Innospec	1	1	0	0	1.50

Brenntag currently has a consensus target price of $12.80, suggesting a potential upside of 7.38%. Given Brenntag’s stronger consensus rating and higher probable upside, analysts plainly believe Brenntag is more favorable than Innospec.

Profitability

This table compares Brenntag and Innospec’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Brenntag	2.66%	9.14%	3.69%
Innospec	-0.07%	10.28%	7.35%

Risk & Volatility

Brenntag has a beta of 0.75, meaning that its share price is 25% less volatile than the S&P 500. Comparatively, Innospec has a beta of 0.91, meaning that its share price is 9% less volatile than the S&P 500.

Institutional & Insider Ownership

96.6% of Innospec shares are owned by institutional investors. 1.3% of Innospec shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Valuation and Earnings

This table compares Brenntag and Innospec”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Brenntag	$17.57 billion	0.49	$580.22 million	$0.64	18.63
Innospec	$1.85 billion	1.08	$35.60 million	($0.03)	-2,675.33

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

Dividends

Brenntag pays an annual dividend of $0.28 per share and has a dividend yield of 2.3%. Innospec pays an annual dividend of $1.74 per share and has a dividend yield of 2.2%. Brenntag pays out 43.8% of its earnings in the form of a dividend. Innospec pays out -5,800.0% 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. Innospec has raised its dividend for 11 consecutive years.

About Brenntag

Brenntag SE purchases and supplies various industrial and specialty chemicals, and ingredients in Germany, Europe, the Middle East, Africa, the Americas, and the Asia Pacific. The company operates in two segments, Brenntag Essentials and Brenntag Specialties. It provides just-in-time delivery, product mixing, blending, repackaging, inventory management, and drum return handling. The company serves customers in various end-market industries, including nutrition, pharma, personal care, water treatment, and lubricants; and home, industrial, and institutional markets, as well as coatings and constructions, polymers, and rubber industries. The company was founded in 1874 and is based in Essen, Germany.

About Innospec

Innospec Inc. develops, manufactures, blends, markets, and supplies specialty chemicals in the United States, rest of North America, the United Kingdom, rest of Europe, and internationally. The company's Fuel Specialties segment offers a range of specialty chemical products that are used as additives in additives in diesel, jet, marine, fuel oil and other fuels. This segment's products are used in the operation of commercial trucking, marine and aviation engines, power station generators, heating oil, and other industrial machinery applications. Its Performance Chemicals segment provides technology-based solutions for its customers' processes or products that focuses on the personal care, home care, agrochemical, construction, mining, and other industrial markets. The company's Oilfield Services segment develops and markets chemical solutions for drilling, completion, fracturing, stimulation, and completion operations; and products for oil and gas production. It sells its products primarily to oil and gas exploration and production companies, oil refineries, fuel manufacturers and users, personal care and home care companies, formulators of agrochemical, and other chemical and industrial companies. The company was formerly known as Octel Corp. and changed its name to Innospec Inc. in January 2006. Innospec Inc. was founded in 1938 and is headquartered in Englewood, Colorado.