Timken Steel Corporation (NYSE: TMST) and Ternium (NYSE:TX) are both basic materials companies, but which is the superior business? We will contrast the two businesses based on the strength of their institutional ownership, analyst recommendations, profitability, valuation, earnings, dividends and risk.

Institutional and Insider Ownership

75.6% of Timken Steel Corporation shares are owned by institutional investors. Comparatively, 19.8% of Ternium shares are owned by institutional investors. 8.1% of Timken Steel Corporation shares are owned by insiders. Comparatively, 0.0% of Ternium shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock will outperform the market over the long term.

Risk and Volatility

Timken Steel Corporation has a beta of 2.27, suggesting that its share price is 127% more volatile than the S&P 500. Comparatively, Ternium has a beta of 1.09, suggesting that its share price is 9% more volatile than the S&P 500.

Profitability

This table compares Timken Steel Corporation and Ternium’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Timken Steel Corporation -8.13% -14.32% -7.91%
Ternium 11.05% 16.61% 10.16%

Analyst Ratings

This is a summary of current ratings and target prices for Timken Steel Corporation and Ternium, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Timken Steel Corporation 0 2 1 0 2.33
Ternium 0 1 4 0 2.80

Timken Steel Corporation currently has a consensus price target of $19.75, indicating a potential upside of 30.11%. Ternium has a consensus price target of $30.13, indicating a potential downside of 4.15%. Given Timken Steel Corporation’s higher possible upside, research analysts plainly believe Timken Steel Corporation is more favorable than Ternium.

Dividends

Ternium pays an annual dividend of $1.00 per share and has a dividend yield of 3.2%. Timken Steel Corporation does not pay a dividend. Ternium pays out 22.9% of its earnings in the form of a dividend.

Earnings & Valuation

This table compares Timken Steel Corporation and Ternium’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Timken Steel Corporation $1.08 billion 0.62 -$29.80 million ($1.99) -7.63
Ternium $8.01 billion 0.77 $1.78 billion $4.37 7.19

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

Summary

Ternium beats Timken Steel Corporation on 10 of the 15 factors compared between the two stocks.

About Timken Steel Corporation

TimkenSteel Corporation manufactures alloy steel, as well as carbon and micro-alloy steel. The Company’s portfolio includes special bar quality (SBQ) bars, seamless mechanical tubing and precision steel components. In addition, the Company supplies machining and thermal treatment services, as well as manage raw material recycling programs, which are used as a feeder system for its melt operations. The Company’s products include SBQ Steel and Seamless Mechanical Steel Tubing, and Value-added Precision Products and Services. Its focus is on alloy steel. The Company manufactures carbon, micro-alloy and alloy steel, sold as ingots, bars and tubes. In addition to its customized steels, the Company also manufactures custom-make precision components. Its products and services are used in a range of demanding applications in the market sectors, such as oil and gas, industrial equipment, mining and power generation.

About Ternium

Ternium S.A. is a producer of steel products. The Company produces finished and semi-finished steel products and iron ore, which are sold either directly to steel manufacturers, steel processors or end users. The Company operates through two segments: Steel and Mining. The Steel segment includes the sales of steel products and the Mining segment includes the sales of iron ore products, which are primarily inter-company. The Steel segment comprises three operating segments: Mexico, the Southern Region and Other Markets. In the steel segment, steel products include slabs, billets and round bars (steel in its basic, semi-finished state), hot-rolled coils and sheets, bars and stirrups, wire rods, cold-rolled coils and sheets, tin plate, hot dipped galvanized and electrogalvanized sheets and pre-painted sheets, steel pipes and tubular products, beams, roll-formed products, and other products. In the mining segment, iron ore is sold as concentrates (fines) and pellets.

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