Stepan (NYSE:SCL) versus Methanex (NASDAQ:MEOH) Financial Comparison

Stepan (NYSE:SCL) and Methanex (NASDAQ:MEOH) are both basic materials companies, but which is the superior investment? We will compare the two companies based on the strength of their earnings, valuation, dividends, risk, institutional ownership, analyst recommendations and profitability.

Analyst Ratings

This is a summary of recent ratings and target prices for Stepan and Methanex, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Stepan	2	0	0	0	1.00
Methanex	0	6	5	1	2.58

Methanex has a consensus price target of $63.90, indicating a potential downside of 0.54%. Given Methanex’s stronger consensus rating and higher probable upside, analysts clearly believe Methanex is more favorable than Stepan.

Institutional & Insider Ownership

82.7% of Stepan shares are held by institutional investors. Comparatively, 73.5% of Methanex shares are held by institutional investors. 6.6% of Stepan shares are held by company insiders. Comparatively, 1.0% of Methanex shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock will outperform the market over the long term.

Volatility & Risk

Stepan has a beta of 0.95, suggesting that its stock price is 5% less volatile than the S&P 500. Comparatively, Methanex has a beta of 0.6, suggesting that its stock price is 40% less volatile than the S&P 500.

Valuation and Earnings

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

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Stepan	$2.33 billion	0.50	$46.90 million	($0.62)	-82.98
Methanex	$3.59 billion	1.38	$79.88 million	($0.49)	-131.12

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

Profitability

This table compares Stepan and Methanex’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Stepan	-0.61%	2.65%	1.37%
Methanex	-1.25%	2.96%	1.12%

Dividends

Stepan pays an annual dividend of $1.58 per share and has a dividend yield of 3.1%. Methanex pays an annual dividend of $0.74 per share and has a dividend yield of 1.2%. Stepan pays out -254.8% of its earnings in the form of a dividend. Methanex pays out -151.0% 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. Stepan has increased its dividend for 57 consecutive years and Methanex has increased its dividend for 4 consecutive years. Stepan is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

About Stepan

Stepan Company, together with its subsidiaries, produces and sells specialty and intermediate chemicals to other manufacturers for use in various end products worldwide. It operates through three segments: Surfactants, Polymers, and Specialty Products. The Surfactants segment offers surfactants that are used in consumer and industrial cleaning and disinfection products, including detergents for washing clothes, dishes, carpets, and floors and walls, as well as shampoos and body washes; and other applications, such as fabric softeners, germicidal quaternary compounds, disinfectants, and lubricating ingredients. Its surfactants are also used in various applications, including emulsifiers for spreading agricultural products; and industrial applications comprising latex systems, plastics, and composites. The Polymers segment provides polyurethane polyols that are used in the manufacture of rigid foam for thermal insulation in the construction industry, as well as a base raw material for coatings, adhesives, sealants, and elastomers (CASE); polyester resins, including liquid and powdered products, which are used in CASE applications; and phthalic anhydride that is used in unsaturated polyester resins, alkyd resins, and plasticizers for applications in construction materials, as well as components of automotive, boating, and other consumer products. The Specialty Products segment offers flavors, emulsifiers, and solubilizers for use in food, flavoring, nutritional supplement, and pharmaceutical applications. Stepan Company was founded in 1932 and is headquartered in Northbrook, Illinois.

About Methanex

Methanex Corporation produces and supplies methanol in China, Europe, the United States, South America, South Korea, Canada, and Asia. The company also purchases methanol produced by others under methanol offtake contracts and on the spot market. In addition, it owns and leases storage and terminal facilities. The company owns and manages a fleet of approximately 30 ocean-going vessels. It serves chemical and petrochemical producers. Methanex Corporation was incorporated in 1968 and is headquartered in Vancouver, Canada.