Shin-Etsu Chemical (OTCMKTS:SHECY) vs. Innospec (NASDAQ:IOSP) Critical Comparison

Shin-Etsu Chemical (OTCMKTS:SHECY) and Innospec (NASDAQ:IOSP) are both materials companies, but which is the superior business? We will contrast the two companies based on the strength of their dividends, profitability, earnings, analyst recommendations, institutional ownership, risk and valuation.

Volatility and Risk

Shin-Etsu Chemical has a beta of 1.35, indicating that its share price is 35% more volatile than the S&P 500. Comparatively, Innospec has a beta of 0.93, indicating that its share price is 7% less volatile than the S&P 500.

Analyst Ratings

This is a summary of recent recommendations for Shin-Etsu Chemical and Innospec, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Shin-Etsu Chemical	0	1	0	0	2.00
Innospec	0	2	0	0	2.00

Dividends

Shin-Etsu Chemical pays an annual dividend of $0.20 per share and has a dividend yield of 1.1%. Innospec pays an annual dividend of $1.84 per share and has a dividend yield of 2.0%. Shin-Etsu Chemical pays out 24.1% of its earnings in the form of a dividend. Innospec pays out 37.6% 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. Innospec has raised its dividend for 11 consecutive years. Innospec is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

This table compares Shin-Etsu Chemical and Innospec’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Shin-Etsu Chemical	18.39%	10.49%	8.62%
Innospec	6.60%	9.22%	6.74%

Earnings & Valuation

This table compares Shin-Etsu Chemical and Innospec”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Shin-Etsu Chemical	$17.10 billion	4.30	$3.15 billion	$0.83	22.30
Innospec	$1.84 billion	1.25	$116.60 million	$4.90	19.01

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

Insider and Institutional Ownership

0.0% of Shin-Etsu Chemical shares are owned by institutional investors. Comparatively, 96.6% of Innospec shares are owned by institutional investors. 1.5% of Innospec shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Summary

Shin-Etsu Chemical beats Innospec on 9 of the 14 factors compared between the two stocks.

About Shin-Etsu Chemical

Shin-Etsu Chemical Co., Ltd. provides infrastructure, electronics, and functional materials in Japan. It is also involved in processing and specialized related services. The company operates through Infrastructure Materials; Electronics Materials; Functional Materials; and Processing and Specialized Services segments. In addition, it offers cellulose derivatives, synthetic pheromones, aroma chemicals, dielectric and LED/ semiconductor materials, silanes, photoresists, chlorides, caustic soda, liquid fluoroelastomers, polyvinyl chloride and vinyl acetate resin, silicones, and silicones processed goods. Further, the company offers pellicles, photomask blanks, synthetic quartz/ quartz cloth, pyrolytic boron nitride, LIB anode material, and silicon metal. Additionally, it provides rare earth magnets, compound semiconductors, and oxide single crystals. The company was formerly known as Shin-Etsu Nitrogen Fertilizer Co., Ltd. and changed its name to Shin-Etsu Chemical Co., Ltd. in 1940. Shin-Etsu Chemical Co., Ltd. was incorporated in 1926 and is headquartered in Tokyo, Japan.

About Innospec

Innospec Inc. develops, manufactures, blends, markets, and supplies specialty chemicals in the United States, rest of North America, the United Kingdom, rest of Europe, and internationally. The company's Fuel Specialties segment offers a range of specialty chemical products that are used as additives in additives in diesel, jet, marine, fuel oil and other fuels. This segment's products are used in the operation of commercial trucking, marine and aviation engines, power station generators, heating oil, and other industrial machinery applications. Its Performance Chemicals segment provides technology-based solutions for its customers' processes or products that focuses on the personal care, home care, agrochemical, construction, mining, and other industrial markets. The company's Oilfield Services segment develops and markets chemical solutions for drilling, completion, fracturing, stimulation, and completion operations; and products for oil and gas production. It sells its products primarily to oil and gas exploration and production companies, oil refineries, fuel manufacturers and users, personal care and home care companies, formulators of agrochemical, and other chemical and industrial companies. The company was formerly known as Octel Corp. and changed its name to Innospec Inc. in January 2006. Innospec Inc. was founded in 1938 and is headquartered in Englewood, Colorado.