POSCO (PKX) & Ternium (TX) Financial Contrast

POSCO (NYSE: PKX) and Ternium (NYSE:TX) are both basic materials companies, but which is the better business? We will contrast the two companies based on the strength of their earnings, valuation, institutional ownership, risk, profitability, dividends and analyst recommendations.

Dividends

POSCO pays an annual dividend of $0.56 per share and has a dividend yield of 0.8%. Ternium pays an annual dividend of $1.00 per share and has a dividend yield of 3.2%. POSCO pays out 8.6% of its earnings in the form of a dividend. Ternium pays out 22.2% 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.

Profitability

This table compares POSCO and Ternium’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
POSCO 4.59% 5.84% 3.46%
Ternium 9.28% 15.65% 8.50%

Analyst Ratings

This is a breakdown of current ratings for POSCO and Ternium, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
POSCO 0 1 3 0 2.75
Ternium 0 1 4 0 2.80

Ternium has a consensus price target of $34.00, suggesting a potential upside of 7.19%. Given Ternium’s stronger consensus rating and higher probable upside, analysts clearly believe Ternium is more favorable than POSCO.

Insider & Institutional Ownership

5.3% of POSCO shares are owned by institutional investors. Comparatively, 19.0% of Ternium shares are owned by institutional investors. 0.0% of POSCO shares are owned by company insiders. Comparatively, 0.0% of Ternium shares are owned by company 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.

Earnings and Valuation

This table compares POSCO and Ternium’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
POSCO $54.59 billion 0.44 $2.51 billion $6.51 11.41
Ternium $9.70 billion 0.66 $886.21 million $4.51 7.03

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

Volatility and Risk

POSCO has a beta of 1.29, meaning that its stock price is 29% more volatile than the S&P 500. Comparatively, Ternium has a beta of 1.1, meaning that its stock price is 10% more volatile than the S&P 500.

Summary

Ternium beats POSCO on 10 of the 16 factors compared between the two stocks.

About POSCO

POSCO is a Korea-based company principally engaged in the manufacture and distribution of steel products. The Company operates in four segments: steel, trading, construction, and others. The steel segment includes production of steel products and sale of such products. The trading segment consists of global trading activities of POSCO Daewoo Corporation, exporting and importing a range of steel products that are both obtained from and supplied to it, as well as between other suppliers and purchasers in Korea and overseas. The construction segment includes planning, designing and construction of industrial plants, civil engineering projects, and commercial and residential buildings, both in Korea and overseas. The others segment includes power generation, liquefied natural gas (LNG) logistics, and network and system integration.

About Ternium

Ternium S.A. manufactures and processes various steel products in Mexico, Argentina, Bolivia, Chile, Paraguay, Uruguay, Colombia, the United States, Central America, and internationally. The company operates in two segments, Steel and Mining. The Steel segment offers steel products, such as slabs, billets and round bars, hot-rolled coils and sheets, bars and stirrups, wire rods, cold-rolled coils and sheets, tin plates, hot dipped galvanized and electrogalvanized sheets, pre-painted sheets, steel pipes and tubular products, beams, roll formed products, and other products. The Mining segment sells iron ore concentrates and pellets. The company serves various companies and small businesses operating in construction, automotive, home appliances, capital goods, container, food, and energy industries. Ternium S.A. was founded in 1961 and is headquartered in Buenos Aires, Argentina. Ternium S.A. is a subsidiary of Techint Holdings S.à r.l.

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