AK Steel (AKS) and Commercial Metals (CMC) Critical Review

AK Steel (NYSE: AKS) and Commercial Metals (NYSE:CMC) are both basic materials companies, but which is the better stock? We will compare the two companies based on the strength of their profitability, institutional ownership, valuation, earnings, dividends, analyst recommendations and risk.

Volatility & Risk

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AK Steel has a beta of 2.89, suggesting that its stock price is 189% more volatile than the S&P 500. Comparatively, Commercial Metals has a beta of 1.34, suggesting that its stock price is 34% more volatile than the S&P 500.

Insider & Institutional Ownership

67.8% of AK Steel shares are held by institutional investors. Comparatively, 88.2% of Commercial Metals shares are held by institutional investors. 0.8% of AK Steel shares are held by company insiders. Comparatively, 1.5% of Commercial Metals shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock will outperform the market over the long term.

Profitability

This table compares AK Steel and Commercial Metals’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
AK Steel 0.16% 71.24% 2.64%
Commercial Metals 1.15% 8.05% 3.81%

Valuation & Earnings

This table compares AK Steel and Commercial Metals’ gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
AK Steel $6.08 billion 0.23 $6.19 million $0.31 14.23
Commercial Metals $4.57 billion 0.50 $46.33 million $0.62 31.69

Commercial Metals has lower revenue, but higher earnings than AK Steel. AK Steel is trading at a lower price-to-earnings ratio than Commercial Metals, indicating that it is currently the more affordable of the two stocks.

Dividends

Commercial Metals pays an annual dividend of $0.48 per share and has a dividend yield of 2.4%. AK Steel does not pay a dividend. Commercial Metals pays out 77.4% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Analyst Ratings

This is a summary of current recommendations and price targets for AK Steel and Commercial Metals, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
AK Steel 1 9 5 0 2.27
Commercial Metals 3 2 4 0 2.11

AK Steel presently has a consensus price target of $6.61, suggesting a potential upside of 49.82%. Commercial Metals has a consensus price target of $23.00, suggesting a potential upside of 16.28%. Given AK Steel’s stronger consensus rating and higher probable upside, research analysts clearly believe AK Steel is more favorable than Commercial Metals.

Summary

Commercial Metals beats AK Steel on 9 of the 16 factors compared between the two stocks.

AK Steel Company Profile

AK Steel Holding Corporation is a producer of flat-rolled carbon, stainless and electrical steels, and tubular products through its subsidiary, AK Steel Corporation (AK Steel). The Company also operates blast furnaces and electric arc furnaces. As of December 31, 2016, its operations included eight steelmaking and finishing plants, two coke plants and two tube manufacturing plants across states, including Indiana, Kentucky, Michigan, Ohio, Pennsylvania and West Virginia, and a tube manufacturing plant in Mexico. These operations produce flat-rolled carbon, specialty stainless and electrical steels that it sells in sheet and strip form, and carbon and stainless steel that it finishes into welded steel tubing. It also produces metallurgical coal through its subsidiary, AK Coal Resources, Inc. In addition, the Company operates trading companies in Mexico and Europe that buy and sell steel and steel products and other materials.

Commercial Metals Company Profile

Commercial Metals Company, together with its subsidiaries, manufactures, recycles and markets steel and metal products, related materials and services through a network. The Company’s Americas Recycling segment processes scrap metals for use as a raw material by manufacturers of new metal products. The Americas Mills segment consists of steel mills, commonly referred to as minimills that produce reinforcing bar (rebar), angles, flats and rounds. Its Americas Fabrication segment consists of its steel fabrication facilities that bend, weld, cut and fabricate steel, primarily rebar. Its International Mill segment consists of its mill, recycling and fabrication operations located in Poland. Its International Marketing and Distribution segment includes international operations for the sales, distribution and processing of primary and secondary metals, fabricated metals, semi-finished, long and flat steel products, and other industrial products.

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