Critical Contrast: Nippon Steel & Sumitomo Metal (OTCMKTS:NPSCY) versus ArcelorMittal (NYSE:MT)

Nippon Steel & Sumitomo Metal (OTCMKTS:NPSCY) and ArcelorMittal (NYSE:MT) are both large-cap basic materials companies, but which is the better business? We will contrast the two companies based on the strength of their institutional ownership, analyst recommendations, risk, profitability, dividends, valuation and earnings.

Analyst Recommendations

This is a summary of recent ratings for Nippon Steel & Sumitomo Metal and ArcelorMittal, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Nippon Steel & Sumitomo Metal	0	0	0	0	0.00
ArcelorMittal	0	6	3	0	2.33

ArcelorMittal has a consensus target price of $34.95, suggesting a potential downside of 6.69%. Given ArcelorMittal’s stronger consensus rating and higher possible upside, analysts plainly believe ArcelorMittal is more favorable than Nippon Steel & Sumitomo Metal.

Insider & Institutional Ownership

9.3% of ArcelorMittal shares are owned by institutional investors. 0.1% of ArcelorMittal shares are owned by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Profitability

This table compares Nippon Steel & Sumitomo Metal and ArcelorMittal’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Nippon Steel & Sumitomo Metal	-0.42%	-0.61%	-0.30%
ArcelorMittal	4.11%	4.99%	2.90%

Volatility and Risk

Nippon Steel & Sumitomo Metal has a beta of 0.77, meaning that its share price is 23% less volatile than the S&P 500. Comparatively, ArcelorMittal has a beta of 1.72, meaning that its share price is 72% more volatile than the S&P 500.

Dividends

Nippon Steel & Sumitomo Metal pays an annual dividend of $0.15 per share and has a dividend yield of 3.8%. ArcelorMittal pays an annual dividend of $0.46 per share and has a dividend yield of 1.2%. Nippon Steel & Sumitomo Metal pays out -750.0% of its earnings in the form of a dividend. ArcelorMittal pays out 14.2% 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. Nippon Steel & Sumitomo Metal is clearly the better dividend stock, given its higher yield and lower payout ratio.

Valuation & Earnings

This table compares Nippon Steel & Sumitomo Metal and ArcelorMittal”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Nippon Steel & Sumitomo Metal	$57.10 billion	0.38	$2.31 billion	($0.02)	-199.50
ArcelorMittal	$60.63 billion	0.51	$1.34 billion	$3.24	11.56

Nippon Steel & Sumitomo Metal has higher earnings, but lower revenue than ArcelorMittal. Nippon Steel & Sumitomo Metal is trading at a lower price-to-earnings ratio than ArcelorMittal, indicating that it is currently the more affordable of the two stocks.

Summary

ArcelorMittal beats Nippon Steel & Sumitomo Metal on 13 of the 16 factors compared between the two stocks.

About Nippon Steel & Sumitomo Metal

Nippon Steel Corporation engages in steelmaking and steel fabrication, engineering and construction, chemicals and materials, and system solutions businesses in Japan and internationally. The company offers steel plates, sheets, and slags; bar and rod materials; structural steel; pipes and tubes; titanium and stainless products; and railway, automotive, and machinery parts for applications in automotive, energy, infrastructure, and consumer electronics markets. It is also involved in construction; waste processing and recycling; supplying electricity, gas, and heat; and the provision of coal-based chemical products, petrochemicals, electronic materials, materials and components for semiconductors and electronic parts, carbon fiber, and composite products. In addition, the company offers computer systems engineering and consulting, IT-enabled outsourcing, and other services. The company was formerly known as Nippon Steel & Sumitomo Metal Corporation and changed its name to Nippon Steel Corporation in April 2019. The company was incorporated in 1950 and is headquartered in Tokyo, Japan.

About ArcelorMittal

ArcelorMittal S.A., together with its subsidiaries, operates as integrated steel and mining companies in the United States, Europe, and internationally. It offers semi-finished flat products, including slabs; finished flat products comprising plates, hot- and cold-rolled coils and sheets, hot-dipped and electro-galvanized coils and sheets, tinplate, and color coated coils and sheets; semi-finished long products, such as blooms and billets; finished long products consisting of bars, wire-rods, structural sections, rails, sheet piles, and wire-products; and seamless and welded pipes and tubes. The company also provides mining products, such as iron ore lumps, fines, concentrates, pellets, and sinter feeds; and coking coal. It sells its products to various customers in the automotive, appliance, engineering, construction, energy, and machinery industries through a centralized marketing organization, as well as distributors. The company has iron ore mining activities in Brazil, Bosnia, Canada, Liberia, Mexico, South Africa, and Ukraine. ArcelorMittal S.A. was founded in 1976 and is headquartered in Luxembourg City, Luxembourg.