Stepan (NYSE: SCL) and Sensient Technologies Corporation (NYSE:SXT) are both basic materials companies, but which is the superior investment? We will contrast the two businesses based on the strength of their risk, analyst recommendations, profitability, institutional ownership, valuation, earnings and dividends.
Volatility and Risk
Stepan has a beta of 1.28, meaning that its stock price is 28% more volatile than the S&P 500. Comparatively, Sensient Technologies Corporation has a beta of 1.09, meaning that its stock price is 9% more volatile than the S&P 500.
Valuation & Earnings
This table compares Stepan and Sensient Technologies Corporation’s top-line revenue, earnings per share (EPS) and valuation.
|Gross Revenue||Price/Sales Ratio||EBITDA||Earnings Per Share||Price/Earnings Ratio|
|Stepan||$1.83 billion||1.08||$207.56 million||$3.81||23.02|
|Sensient Technologies Corporation||$1.36 billion||2.55||$247.07 million||$2.48||31.94|
Sensient Technologies Corporation has higher revenue, but lower earnings than Stepan. Stepan is trading at a lower price-to-earnings ratio than Sensient Technologies Corporation, indicating that it is currently the more affordable of the two stocks.
This table compares Stepan and Sensient Technologies Corporation’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
|Sensient Technologies Corporation||8.16%||17.15%||8.75%|
Stepan pays an annual dividend of $0.82 per share and has a dividend yield of 0.9%. Sensient Technologies Corporation pays an annual dividend of $1.20 per share and has a dividend yield of 1.5%. Stepan pays out 21.5% of its earnings in the form of a dividend. Sensient Technologies Corporation pays out 48.4% 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 5 consecutive years and Sensient Technologies Corporation has raised its dividend for 49 consecutive years. Sensient Technologies Corporation is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.
This is a breakdown of recent ratings and price targets for Stepan and Sensient Technologies Corporation, as provided by MarketBeat.com.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
|Sensient Technologies Corporation||0||0||2||0||3.00|
Stepan presently has a consensus target price of $36.25, indicating a potential downside of 58.66%. Sensient Technologies Corporation has a consensus target price of $89.15, indicating a potential upside of 12.56%. Given Sensient Technologies Corporation’s stronger consensus rating and higher possible upside, analysts clearly believe Sensient Technologies Corporation is more favorable than Stepan.
Insider and Institutional Ownership
62.5% of Stepan shares are owned by institutional investors. Comparatively, 89.0% of Sensient Technologies Corporation shares are owned by institutional investors. 13.1% of Stepan shares are owned by insiders. Comparatively, 1.0% of Sensient Technologies Corporation shares are owned by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.
Sensient Technologies Corporation beats Stepan on 11 of the 17 factors compared between the two stocks.
Stepan Company Profile
Stepan Company produces specialty and intermediate chemicals, which are sold to other manufacturers and used in a range of end products. The Company operates through three segments: Surfactants, Polymers and Specialty Products. The Company’s principal markets include manufacturers of cleaning and washing compounds (including detergents, shampoos, fabric softeners, toothpastes and household cleaners), paints, cosmetics, food, beverages, nutritional supplements, agricultural products and plastics. Its Surfactants segment offers products, which are principal ingredients in consumer and industrial cleaning products, such as detergents for washing clothes, dishes, carpets, floors and walls, as well as shampoos and body washes. Its Polymers segment includes polyurethane polyols, polyester resins and phthalic anhydride. Its Specialty Products segment includes flavors, emulsifiers and solubilizers used in food, flavoring, nutritional supplement and pharmaceutical applications.
Sensient Technologies Corporation Company Profile
Sensient Technologies Corporation is a manufacturer and marketer of colors, flavors and fragrances. The Company uses technologies at facilities around the world to develop specialty food and beverage systems, cosmetic and pharmaceutical systems, specialty inks and colors, and other specialty and fine chemicals. The Company’s three segments include the Flavors & Fragrances Group and the Color Group, which are managed on a product-and-services basis, and the Asia Pacific Group, which is managed on a geographic basis. The Company’s principal products include flavors, flavor enhancers and bionutrients; fragrances, aroma chemicals and essential oils; natural ingredients, including dehydrated vegetables and other food ingredients; natural and synthetic food and beverage colors; cosmetic colors and ingredients and pharmaceutical excipients and ingredients, and technical colors, specialty inks and colors, and specialty dyes and pigments.
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