Analyzing Kraton (KRA) and KMG Chemicals (KMG)
KMG Chemicals (NYSE: KMG) and Kraton (NYSE:KRA) are both small-cap basic materials companies, but which is the superior business? We will contrast the two businesses based on the strength of their institutional ownership, earnings, valuation, dividends, profitability, risk and analyst recommendations.
KMG Chemicals pays an annual dividend of $0.12 per share and has a dividend yield of 0.2%. Kraton does not pay a dividend. KMG Chemicals pays out 6.3% of its earnings in the form of a dividend.
Earnings and Valuation
This table compares KMG Chemicals and Kraton’s top-line revenue, earnings per share and valuation.
|Gross Revenue||Price/Sales Ratio||Net Income||Earnings Per Share||Price/Earnings Ratio|
|KMG Chemicals||$333.44 million||2.51||$23.63 million||$1.92||28.33|
|Kraton||$1.74 billion||0.84||$107.30 million||$0.76||61.91|
Kraton has higher revenue and earnings than KMG Chemicals. KMG Chemicals is trading at a lower price-to-earnings ratio than Kraton, indicating that it is currently the more affordable of the two stocks.
Institutional & Insider Ownership
56.2% of KMG Chemicals shares are owned by institutional investors. Comparatively, 97.5% of Kraton shares are owned by institutional investors. 6.1% of KMG Chemicals shares are owned by company insiders. Comparatively, 4.7% of Kraton shares are owned by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.
This is a breakdown of current ratings and price targets for KMG Chemicals and Kraton, as reported by MarketBeat.com.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
KMG Chemicals currently has a consensus target price of $50.00, suggesting a potential downside of 8.07%. Kraton has a consensus target price of $60.00, suggesting a potential upside of 27.52%. Given Kraton’s higher possible upside, analysts clearly believe Kraton is more favorable than KMG Chemicals.
Volatility and Risk
KMG Chemicals has a beta of 0.56, suggesting that its share price is 44% less volatile than the S&P 500. Comparatively, Kraton has a beta of 1.21, suggesting that its share price is 21% more volatile than the S&P 500.
This table compares KMG Chemicals and Kraton’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
KMG Chemicals beats Kraton on 9 of the 15 factors compared between the two stocks.
About KMG Chemicals
KMG Chemicals, Inc. manufactures, formulates and globally distributes specialty chemicals. The Company operates businesses selling electronic chemicals, industrial wood treating chemicals, and industrial valve lubricants and sealants. The Company operates through two segments: Electronic chemicals and Other chemicals. The Company operates through its subsidiaries, KMG Electronic Chemicals, Inc. (KMG EC), KMG-Bernuth, Inc. (KMG Bernuth) and KMG Val-Tex, LLC (Val-Tex). The Company’s Electronic chemicals business sells high purity and ultra-purity wet process chemicals primarily to the semiconductor industry. The Company’s Other chemicals segment includes its industrial lubricants business and wood treating chemicals business. The Company’s products sulfuric, phosphoric, nitric and hydrofluoric acids, ammonium hydroxide, hydrogen peroxide, isopropyl alcohol, other specialty organic solvents and various blends of chemicals.
Kraton Corporation, formerly Kraton Performance Polymers, Inc., is a specialty chemicals company. The Company manufactures styrenic block copolymers (SBCs) and other engineered polymers. The Company also produces specialty products primarily derived from pine wood pulping co-products. The Company operates through two segments: Polymer Segment, which comprises SBCs and other engineered polymers business, and Chemical Segment, which comprises pine-based specialty products business. Its SBCs are used in a range of applications, including adhesives, coatings, consumer and personal care products, sealants, lubricants, medical, packaging, automotive, paving, roofing and footwear products. The Company also sells isoprene rubber (IR) and isoprene rubber latex (IRL), which are non-SBC products primarily used in applications, such as medical products, personal care, adhesives, tackifiers, paints and coatings. It offers crude tall oil (CTO) and crude sulfate turpentine (CST).
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