Contrasting SSAB (OTCMKTS:SSAAY) and Gerdau (NYSE:GGB)

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

Insider and Institutional Ownership

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

Dividends

Gerdau pays an annual dividend of $0.21 per share and has a dividend yield of 4.6%. SSAB pays an annual dividend of $0.05 per share and has a dividend yield of 1.1%. Gerdau pays out 75.0% of its earnings in the form of a dividend. SSAB pays out 16.7% 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.

Earnings & Valuation

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

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Gerdau	$70.25 billion	0.13	$248.41 million	$0.28	16.20
SSAB	$9.84 billion	0.96	$500.98 million	$0.30	15.75

SSAB has lower revenue, but higher earnings 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.

Risk and Volatility

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

Analyst Recommendations

This is a summary of recent ratings and recommmendations for Gerdau and SSAB, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Gerdau	0	5	4	0	2.44
SSAB	0	1	2	1	3.00

Gerdau currently has a consensus target price of $5.65, suggesting a potential upside of 24.59%. Given Gerdau’s higher probable upside, research analysts clearly believe Gerdau is more favorable than SSAB.

Profitability

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

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

Summary

Gerdau beats SSAB on 10 of the 17 factors compared between the two stocks.

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.

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.