Analyzing Gerdau (NYSE:GGB) & SSAB (OTCMKTS:SSAAY)

SSAB (OTCMKTS:SSAAY) and Gerdau (NYSE:GGB) are both mid-cap materials companies, but which is the better investment? We will contrast the two companies based on the strength of their profitability, institutional ownership, analyst recommendations, risk, valuation, earnings and dividends.

Risk and Volatility

SSAB has a beta of 1.36, suggesting that its stock price is 36% more volatile than the S&P 500. Comparatively, Gerdau has a beta of 1.55, suggesting that its stock price is 55% more volatile than the S&P 500.

Earnings and Valuation

This table compares SSAB and Gerdau”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
SSAB	$9.84 billion	1.00	$500.98 million	$0.30	16.50
Gerdau	$12.51 billion	0.73	$248.41 million	$0.28	16.61

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

Profitability

This table compares SSAB and Gerdau’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
SSAB	5.65%	8.19%	5.24%
Gerdau	4.06%	8.90%	5.86%

Institutional & Insider Ownership

1.5% of Gerdau shares are held by institutional investors. 0.0% of Gerdau shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Analyst Ratings

This is a breakdown of current ratings and recommmendations for SSAB and Gerdau, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
SSAB	0	1	2	1	3.00
Gerdau	0	4	4	1	2.67

Gerdau has a consensus target price of $5.65, indicating a potential upside of 21.51%. Given Gerdau’s higher probable upside, analysts clearly believe Gerdau is more favorable than SSAB.

Dividends

SSAB pays an annual dividend of $0.05 per share and has a dividend yield of 1.0%. Gerdau pays an annual dividend of $0.15 per share and has a dividend yield of 3.2%. SSAB pays out 16.7% of its earnings in the form of a dividend. Gerdau pays out 53.6% 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.

Summary

Gerdau beats SSAB on 10 of the 16 factors compared between the two stocks.

About SSAB

SSAB AB (publ) produces and sells steel products in Sweden, Finland, Rest of Europe, the United States, and internationally. It operates through five segments: SSAB Special Steels, SSAB Europe, SSAB Americas, Tibnor, and Ruukki Construction. The SSAB Special Steels segment offers quenched and tempered steels, and advanced high-strength steel products for steel and plate production. The SSAB Europe segment provides strip, heavy plate, and tubular products. The SSAB Americas segment sells heavy plates for steel and plate production. The Tibnor segment distributes a range of steel and non-ferrous metals in the Nordics and Baltics. The Ruukki Construction segment produces and sells energy-efficient building and construction solutions. It markets its steel products under the Strenx, Hardox, Docol, GreenCoat, Toolox, Armox, Duroxite, SSAB AM, SSAB Boron, SSAB Domex, SSAB Form, SSAB Laser, SSAB Weathering, Cor-Ten, and SSAB Multisteel brands. The company's products are used by customers in the heavy transport, construction and infrastructure, industrial applications, construction machinery, energy, and material handling markets. SSAB AB (publ) was founded in 1878 and is headquartered in Stockholm, Sweden.

About Gerdau

Gerdau S.A., together with its subsidiaries, operates as a steel producer company. The company operates through Brazil Business, North America Business, South America Business, and Special Steel Business segments. It also provides semi-finished products, including billets, blooms, and slabs; common long rolled products, such as rebars, wire rods, merchant bars, light shapes, and profiles to the construction and manufacturing industries; drawn products comprising barbed and barbless fence wires, galvanized wires, fences, concrete reinforcing wire mesh, nails, and clamps for manufacturing, construction, and agricultural industries; and special steel products used in auto parts, light and heavy vehicles, and agricultural machinery, as well as in the oil and gas, wind energy, machinery and equipment, mining and rail, and other markets. In addition, the company offers flat products, such as hot-rolled steel coils and heavy plates; and resells flat steel products. Further, it operates mines that produce iron ore located in the Brazilian state of Minas Gerais. The company sells its products through independent distributors, direct sales from the mills, and its retail network. Gerdau S.A. was founded in 1901 and is based in São Paulo, Brazil.