Financial Review: Solutia (SOA) versus Dow Chemical (DOW)
Solutia (NYSE: SOA) and Dow Chemical (NYSE:DOW) are both mid-cap diversified chemicals companies, but which is the better business? We will contrast the two businesses based on the strength of their profitability, earnings, risk, dividends, analyst recommendations, institutional ownership and valuation.
Insider and Institutional Ownership
67.8% of Dow Chemical shares are owned by institutional investors. 0.9% of Dow Chemical shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company will outperform the market over the long term.
Dow Chemical pays an annual dividend of $1.84 per share and has a dividend yield of 2.8%. Solutia does not pay a dividend. Dow Chemical pays out 77.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Solutia has increased its dividend for 6 consecutive years.
This table compares Solutia and Dow Chemical’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
This is a summary of recent ratings and recommmendations for Solutia and Dow Chemical, as provided by MarketBeat.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
Dow Chemical has a consensus target price of $72.14, suggesting a potential upside of 8.24%.
Earnings and Valuation
This table compares Solutia and Dow Chemical’s gross revenue, earnings per share and valuation.
|Gross Revenue||Price/Sales Ratio||NetIncome||Earnings Per Share||Price/Earnings Ratio|
Solutia is trading at a lower price-to-earnings ratio than Dow Chemical, indicating that it is currently the more affordable of the two stocks.
Dow Chemical beats Solutia on 8 of the 10 factors compared between the two stocks.
Solutia Inc., together with its subsidiaries, is a global manufacturer of performance materials and specialty chemicals used in a range of consumer and industrial applications, including interlayers and aftermarket film for automotive and architectural glass; chemicals that promote safety and durability in tires, and encapsulants, coatings and specialty chemicals used in a variety of electronic, industrial and energy solutions. The Company operates in three segments: Advanced Interlayers; Performance Films; and Technical Specialties. On November 23, 2011, the Company acquired Southwall Technologies Inc. (Southwall). In April 2011, the Company sold its Santoweb and Vocol businesses to Rhein Chemie, a wholly owned subsidiary of LANXESS AG.
About Dow Chemical
The Dow Chemical Company manufactures and supplies products used primarily as raw materials in the manufacture of customer products and services. The Company’s segments include Agricultural Sciences, which is engaged in providing crop protection and seed/plant biotechnology products and technologies, urban pest management solutions and healthy oils; Consumer Solutions, which consists of Consumer Care, Dow Automotive Systems, Dow Electronic Materials and Consumer Solutions-Silicones businesses; Infrastructure Solutions, which consists of Dow Building & Construction, Dow Coating Materials, Energy & Water Solutions, Performance Monomers and Infrastructure Solutions-Silicones businesses; Performance Materials & Chemicals, which consists of Chlor-Alkali and Vinyl, Industrial Solutions and Polyurethanes businesses, and Performance Plastics, which consists of Dow Elastomers, Dow Electrical and Telecommunications, Dow Packaging and Specialty Plastics, Energy and Hydrocarbons businesses.
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