NL Industries (NL) & MTS Systems Corporation (MTSC) Critical Analysis

NL Industries (NYSE: NL) and MTS Systems Corporation (NASDAQ:MTSC) are both small-cap basic materials companies, but which is the better stock? We will contrast the two businesses based on the strength of their analyst recommendations, institutional ownership, profitability, valuation, dividends, earnings and risk.

Profitability

This table compares NL Industries and MTS Systems Corporation’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
NL Industries 57.98% 32.04% 16.44%
MTS Systems Corporation 3.13% 12.49% 4.31%

Risk & Volatility

NL Industries has a beta of 2.75, meaning that its share price is 175% more volatile than the S&P 500. Comparatively, MTS Systems Corporation has a beta of 1.28, meaning that its share price is 28% more volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of current ratings and recommmendations for NL Industries and MTS Systems Corporation, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
NL Industries 1 0 0 0 1.00
MTS Systems Corporation 0 1 2 0 2.67

NL Industries presently has a consensus target price of $6.00, suggesting a potential downside of 40.00%. MTS Systems Corporation has a consensus target price of $58.00, suggesting a potential upside of 8.01%. Given MTS Systems Corporation’s stronger consensus rating and higher probable upside, analysts plainly believe MTS Systems Corporation is more favorable than NL Industries.

Valuation & Earnings

This table compares NL Industries and MTS Systems Corporation’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
NL Industries $114.69 million 4.25 $8.15 million $1.37 7.30
MTS Systems Corporation $801.32 million 1.14 $113.92 million $1.31 40.99

MTS Systems Corporation has higher revenue and earnings than NL Industries. NL Industries is trading at a lower price-to-earnings ratio than MTS Systems Corporation, indicating that it is currently the more affordable of the two stocks.

Dividends

MTS Systems Corporation pays an annual dividend of $1.20 per share and has a dividend yield of 2.2%. NL Industries does not pay a dividend. MTS Systems Corporation pays out 91.6% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Insider & Institutional Ownership

9.6% of NL Industries shares are owned by institutional investors. 0.1% of NL Industries shares are owned by company insiders. Comparatively, 1.8% of MTS Systems Corporation shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock is poised for long-term growth.

NL Industries Company Profile

NL Industries, Inc. is a holding company. The Company operates in the component products industry through its subsidiary, CompX International Inc. (CompX). The Company operates in the chemicals industry through its non-controlling interest in Kronos Worldwide, Inc. (Kronos). The Company, through Compx, manufactures engineered components that are sold to a range of industries, including recreational transportation (including boats), postal, office and institutional furniture, cabinetry, tool storage, healthcare, gas stations and vending equipment. Kronos is a global producer and marketer of value-added titanium dioxide pigments (TiO2), a base industrial product used in imparting whiteness, brightness and opacity to a range of customer applications and end use markets, including coatings, plastics, paper, inks, food, cosmetics, and other industrial and consumer products. Kronos has production facilities in Europe and North America.

MTS Systems Corporation Company Profile

MTS Systems Corporation is a supplier of test systems and position sensors. The Company operates through two segments: Test and Sensors. The Test segment provides testing solutions, including hardware, software and services to ground vehicles, materials and structures markets. The Sensors segment provides position sensors for a range of industrial and mobile hydraulic applications. The Sensors segment products are used by industrial machinery and mobile equipment manufacturers to automate the operation of their products for safety and end-user productivity. The Sensors segment manufactures products utilizing magnetostriction technology. Its technology, Temposonics, offers non-contact position sensing. Its Temposonics sensors provide position feedback for motion control systems. It also provides various service offerings, including calibration, maintenance, training and consulting. The Company has its manufacturing facilities in North America, Europe and Asia.

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