Koppers (NYSE:KOP) and Kronos Worldwide (NYSE:KRO) Critical Review

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

Valuation and Earnings

This table compares Kronos Worldwide and Koppers”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Kronos Worldwide	$1.89 billion	0.34	$86.20 million	($0.36)	-15.68
Koppers	$2.09 billion	0.35	$52.40 million	$0.80	46.55

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

Institutional and Insider Ownership

15.1% of Kronos Worldwide shares are held by institutional investors. Comparatively, 92.8% of Koppers shares are held by institutional investors. 0.1% of Kronos Worldwide shares are held by company insiders. Comparatively, 6.9% of Koppers shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Profitability

This table compares Kronos Worldwide and Koppers’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Kronos Worldwide	-2.22%	-3.09%	-1.33%
Koppers	0.84%	16.48%	4.46%

Risk & Volatility

Kronos Worldwide has a beta of 1.14, meaning that its share price is 14% more volatile than the S&P 500. Comparatively, Koppers has a beta of 1.4, meaning that its share price is 40% more volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of recent ratings and recommmendations for Kronos Worldwide and Koppers, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Kronos Worldwide	3	1	0	0	1.25
Koppers	0	2	2	0	2.50

Kronos Worldwide currently has a consensus target price of $6.00, indicating a potential upside of 6.29%. Koppers has a consensus target price of $52.50, indicating a potential upside of 40.98%. Given Koppers’ stronger consensus rating and higher possible upside, analysts plainly believe Koppers is more favorable than Kronos Worldwide.

Dividends

Kronos Worldwide pays an annual dividend of $0.20 per share and has a dividend yield of 3.5%. Koppers pays an annual dividend of $0.32 per share and has a dividend yield of 0.9%. Kronos Worldwide pays out -55.6% of its earnings in the form of a dividend. Koppers pays out 40.0% 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. Kronos Worldwide is clearly the better dividend stock, given its higher yield and lower payout ratio.

Summary

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

About Kronos Worldwide

Kronos Worldwide, Inc. produces and markets titanium dioxide pigments (TiO2) in Europe, North America, the Asia Pacific, and internationally. The company produces TiO2 in two crystalline forms, rutile and anatase to impart whiteness, brightness, opacity, and durability for various products, including paints, coatings, plastics, paper, fibers, and ceramics, as well as for various specialty products, such as inks, foods, and cosmetics. It also produces ilmenite, a raw material used directly as a feedstock by sulfate-process TiO2 plants; iron-based chemicals, which are used as treatment and conditioning agents for industrial effluents and municipal wastewater, as well as in the manufacture of iron pigments, cement, and agricultural products; specialty chemicals for use in the formulation of pearlescent pigments, and production of electroceramic capacitors for cell phones and other electronic devices, as well as for use in natural gas pipe, and other specialty applications. In addition, the company provides technical services for its products. It sells its products under the KRONOS brand through agents and distributors to paint, plastics, decorative laminate, and paper manufacturers. The company was founded in 1916 and is headquartered in Dallas, Texas. Kronos Worldwide, Inc. is a subsidiary of Valhi, Inc.

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.