Critical Analysis: Element Solutions (NYSE:ESI) vs. Ashland (NYSE:ASH)

Element Solutions (NYSE:ESI) and Ashland (NYSE:ASH) are both mid-cap basic materials companies, but which is the superior investment? We will compare the two businesses based on the strength of their profitability, risk, institutional ownership, earnings, dividends, analyst recommendations and valuation.

Institutional and Insider Ownership

92.3% of Element Solutions shares are held by institutional investors. Comparatively, 94.0% of Ashland shares are held by institutional investors. 6.9% of Element Solutions shares are held by insiders. Comparatively, 1.3% of Ashland shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Profitability

This table compares Element Solutions and Ashland’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Element Solutions	9.58%	14.01%	7.28%
Ashland	-46.25%	7.07%	3.21%

Dividends

Element Solutions pays an annual dividend of $0.32 per share and has a dividend yield of 1.1%. Ashland pays an annual dividend of $1.66 per share and has a dividend yield of 2.7%. Element Solutions pays out 32.3% of its earnings in the form of a dividend. Ashland pays out -9.0% 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. Ashland has increased its dividend for 16 consecutive years. Ashland is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Earnings and Valuation

This table compares Element Solutions and Ashland”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Element Solutions	$2.46 billion	2.88	$244.20 million	$0.99	29.58
Ashland	$1.82 billion	1.57	-$845.00 million	($18.35)	-3.41

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

Volatility and Risk

Element Solutions has a beta of 1.28, meaning that its share price is 28% more volatile than the S&P 500. Comparatively, Ashland has a beta of 0.43, meaning that its share price is 57% less volatile than the S&P 500.

Analyst Ratings

This is a summary of current recommendations and price targets for Element Solutions and Ashland, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Element Solutions	0	3	6	2	2.91
Ashland	2	3	5	0	2.30

Element Solutions currently has a consensus target price of $31.50, suggesting a potential upside of 7.56%. Ashland has a consensus target price of $65.13, suggesting a potential upside of 4.21%. Given Element Solutions’ stronger consensus rating and higher possible upside, research analysts clearly believe Element Solutions is more favorable than Ashland.

Summary

Element Solutions beats Ashland on 14 of the 18 factors compared between the two stocks.

About Element Solutions

Element Solutions Inc operates as a specialty chemicals company in the United States, China, and internationally. The company operates in two segments, Electronics, and Industrial & Specialty. The Electronics segment researches, formulates, and sells specialty chemicals and materials for various types of electronics hardware products. This segment also supplies surface mount technologies, fluxes, thermal management material, coatings, and other attachment materials; chemical formulations to the electronics industry; and advanced copper interconnects, die attachment, sintered silver material, adhesives, wafer bump processes, and photomask technologies for semiconductor industry. It primarily serves mobile communications, computers, automobiles, and aerospace equipment industries. The Industrial & Specialty segment provides industrial solutions, which include chemical systems that protect and decorate metal and plastic surfaces; consumable chemicals that enable printing image transfer on flexible packaging materials; and chemistries used in water-based hydraulic control fluids for offshore energy production applications. It serves aerospace, automotive, construction, consumer electronics, consumer packaged goods, and oil and gas production end markets. The company was formerly known as Platform Specialty Products Corporation and changed its name to Element Solutions Inc in January 2019. Element Solutions Inc was founded in 1785 and is headquartered in Fort Lauderdale, Florida.

About Ashland

Ashland Inc. provides additives and specialty ingredients in the North and Latin America, Europe, Asia Pacific, and internationally. It operates through Life Sciences, Personal Care, Specialty Additives, and Intermediates segments. The Life Sciences segment offers pharmaceutical solutions, including controlled release polymers, disintegrants, tablet coatings, thickeners, solubilizers, and tablet binders; nutrition solutions, such as thickeners, stabilizers, emulsifiers, and additives; and nutraceutical solutions comprising products for weight management, joint comfort, stomach and intestinal health, sports nutrition, and general wellness, as well as custom formulation, toll processing, and particle engineering solutions. Its Personal Care segment provides a range of nature-based, biodegradable, and performance ingredients; solutions for toothpastes, mouth washes and rinses, denture cleaning, and care for teeth; and household supplies nature-derived rheology ingredients, biodegradable surface wetting agents, performance encapsulates, and specialty polymers. The Specialty Additives segment offers rheology modifiers, foam control agents, surfactants and wetting agents, pH neutralizers, advanced ceramics used in catalytic converters, environmental filters, ingredients for the manufacturing of ceramic capacitors, plasma display panels and solar cells, ingredients for textile printing, thermoplastic metals, and alloys for welding. Its Intermediates segment produces 1,4 butanediol and related derivatives, including n-methylpyrrolidone. It offers its products to customers in a range of consumer and industrial markets, such as architectural coatings, construction, energy, food and beverage, nutraceuticals, personal care, and pharmaceutical. The company was formerly known as Ashland Global Holdings Inc. and changed its name to Ashland Inc. in August 2022. Ashland Inc. was founded in 1924 and is headquartered in Wilmington, Delaware.