Critical Analysis: Ferro (FOE) versus PPG Industries (PPG)

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

Insider & Institutional Ownership

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95.9% of Ferro shares are owned by institutional investors. Comparatively, 76.8% of PPG Industries shares are owned by institutional investors. 2.0% of Ferro shares are owned by company insiders. Comparatively, 0.3% of PPG Industries shares are owned 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.

Risk and Volatility

Ferro has a beta of 1.53, indicating that its stock price is 53% more volatile than the S&P 500. Comparatively, PPG Industries has a beta of 1.56, indicating that its stock price is 56% more volatile than the S&P 500.

Valuation & Earnings

This table compares Ferro and PPG Industries’ revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Ferro $1.40 billion 1.42 $57.05 million $1.29 18.22
PPG Industries $14.75 billion 1.85 $1.59 billion $5.87 18.64

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

Dividends

PPG Industries pays an annual dividend of $1.80 per share and has a dividend yield of 1.6%. Ferro does not pay a dividend. PPG Industries pays out 30.7% of its earnings in the form of a dividend. PPG Industries has raised its dividend for 45 consecutive years.

Profitability

This table compares Ferro and PPG Industries’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Ferro 4.08% 33.58% 7.20%
PPG Industries 10.98% 26.76% 9.03%

Analyst Recommendations

This is a breakdown of current recommendations and price targets for Ferro and PPG Industries, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Ferro 0 0 7 0 3.00
PPG Industries 0 9 8 0 2.47

Ferro presently has a consensus price target of $24.83, indicating a potential upside of 5.63%. PPG Industries has a consensus price target of $125.00, indicating a potential upside of 14.27%. Given PPG Industries’ higher possible upside, analysts clearly believe PPG Industries is more favorable than Ferro.

Summary

PPG Industries beats Ferro on 12 of the 17 factors compared between the two stocks.

Ferro Company Profile

Ferro Corporation produces specialty materials in the United States and internationally. It operates through four business units: Tile Coating Systems; Porcelain Enamel; Performance Colors and Glass; and Color Solutions. The company offers frits, porcelain and other glass enamels, glazes, stains, decorating colors, pigments, inks, polishing materials, dielectrics, electronic glasses, and other specialty coatings. Its products are used in appliances, automobiles, building and renovation, electronics, household furnishings, industrial products, packaging, and sanitary applications. The company markets and sells its products directly, as well as through agents and distributors. Its customers include manufacturers of ceramic tile, construction materials, automobile parts, automobiles, architectural and container glass, and electronic components and devices. Ferro Corporation was founded in 1919 and is headquartered in Mayfield Heights, Ohio.

PPG Industries Company Profile

PPG Industries, Inc. manufactures and distributes a range of coatings and specialty materials. The Company has two segments: Performance Coatings and Industrial Coatings. The Performance Coatings segment includes the refinish, aerospace, protective and marine, architectural businesses. The Industrial Coatings segment includes the automotive original equipment manufacturer (OEM), industrial coatings, packaging coatings, coatings services and specialty coatings and materials businesses. The Company’s geographical segments include the United States, Canada, Western Europe, Latin America, Central and Eastern Europe, the Middle East, Africa and Asia Pacific. The Company’s brands include PPG, GLIDDEN, COMEX, OLYMPIC, DULUX, SIKKENS, PPG PITTSBURGH PAINTS, MULCO, FLOOD, LIQUID NAILS, SICO, CIL, RENNER, TAUBMANS, WHITE KNIGHT, BRISTOL, HOMAX, DEKORAL, TRILAK, GORI, and BONDEX, among others.

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