Financial Analysis: Air Products and Chemicals (NYSE:APD) vs. Stepan (NYSE:SCL)

Stepan (NYSE:SCL) and Air Products and Chemicals (NYSE:APD) are both materials companies, but which is the better stock? We will contrast the two companies based on the strength of their valuation, institutional ownership, risk, earnings, analyst recommendations, dividends and profitability.

Insider & Institutional Ownership

82.7% of Stepan shares are owned by institutional investors. Comparatively, 81.7% of Air Products and Chemicals shares are owned by institutional investors. 6.6% of Stepan shares are owned by insiders. Comparatively, 1.9% of Air Products and Chemicals shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Volatility and Risk

Stepan has a beta of 0.94, meaning that its share price is 6% less volatile than the S&P 500. Comparatively, Air Products and Chemicals has a beta of 0.76, meaning that its share price is 24% less volatile than the S&P 500.

Dividends

Stepan pays an annual dividend of $1.58 per share and has a dividend yield of 2.5%. Air Products and Chemicals pays an annual dividend of $7.24 per share and has a dividend yield of 2.5%. Stepan pays out -1,316.7% of its earnings in the form of a dividend. Air Products and Chemicals pays out -3,290.9% 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. Stepan has raised its dividend for 57 consecutive years and Air Products and Chemicals has raised its dividend for 43 consecutive years. Stepan is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Ratings

This is a breakdown of recent ratings for Stepan and Air Products and Chemicals, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Stepan	1	0	0	1	2.50
Air Products and Chemicals	0	7	11	1	2.68

Air Products and Chemicals has a consensus price target of $334.71, indicating a potential upside of 15.77%. Given Air Products and Chemicals’ stronger consensus rating and higher probable upside, analysts plainly believe Air Products and Chemicals is more favorable than Stepan.

Earnings and Valuation

This table compares Stepan and Air Products and Chemicals”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Stepan	$2.33 billion	0.60	$46.90 million	($0.12)	-516.99
Air Products and Chemicals	$12.04 billion	5.35	-$394.50 million	($0.22)	-1,314.19

Stepan has higher earnings, but lower revenue than Air Products and Chemicals. Air Products and Chemicals is trading at a lower price-to-earnings ratio than Stepan, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Stepan and Air Products and Chemicals’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Stepan	-0.11%	3.90%	2.01%
Air Products and Chemicals	-0.38%	16.87%	7.18%

Summary

Air Products and Chemicals beats Stepan on 9 of the 17 factors compared between the two stocks.

About Stepan

Stepan Company, together with its subsidiaries, produces and sells specialty and intermediate chemicals to other manufacturers for use in various end products worldwide. It operates through three segments: Surfactants, Polymers, and Specialty Products. The Surfactants segment offers surfactants that are used in consumer and industrial cleaning and disinfection products, including detergents for washing clothes, dishes, carpets, and floors and walls, as well as shampoos and body washes; and other applications, such as fabric softeners, germicidal quaternary compounds, disinfectants, and lubricating ingredients. Its surfactants are also used in various applications, including emulsifiers for spreading agricultural products; and industrial applications comprising latex systems, plastics, and composites. The Polymers segment provides polyurethane polyols that are used in the manufacture of rigid foam for thermal insulation in the construction industry, as well as a base raw material for coatings, adhesives, sealants, and elastomers (CASE); polyester resins, including liquid and powdered products, which are used in CASE applications; and phthalic anhydride that is used in unsaturated polyester resins, alkyd resins, and plasticizers for applications in construction materials, as well as components of automotive, boating, and other consumer products. The Specialty Products segment offers flavors, emulsifiers, and solubilizers for use in food, flavoring, nutritional supplement, and pharmaceutical applications. Stepan Company was founded in 1932 and is headquartered in Northbrook, Illinois.

About Air Products and Chemicals

Air Products and Chemicals, Inc. provides atmospheric gases, process and specialty gases, equipment, and related services in the Americas, Asia, Europe, the Middle East, India, and internationally. The company produces atmospheric gases, including oxygen, nitrogen, and argon; process gases, such as hydrogen, helium, carbon dioxide, carbon monoxide, and syngas; and specialty gases for customers in various industries, including refining, chemical, manufacturing, electronics, energy production, medical, food, and metals. It also designs and manufactures equipment for air separation, hydrocarbon recovery and purification, natural gas liquefaction, and liquid helium and liquid hydrogen transport and storage. The company was founded in 1940 and is headquartered in Allentown, Pennsylvania.