Sigma-Aldrich (NASDAQ: SIAL) and Stepan (NYSE:SCL) are both basic materials companies, but which is the better investment? We will compare the two businesses based on the strength of their earnings, analyst recommendations, dividends, valuation, institutional ownership, profitability and risk.

Profitability

This table compares Sigma-Aldrich and Stepan’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Sigma-Aldrich 16.22% 13.72% 10.47%
Stepan 4.85% 14.95% 7.28%

Dividends

Stepan pays an annual dividend of $0.82 per share and has a dividend yield of 1.0%. Sigma-Aldrich does not pay a dividend. Stepan pays out 21.5% of its earnings in the form of a dividend. Sigma-Aldrich has increased its dividend for 41 consecutive years and Stepan has increased its dividend for 49 consecutive years.

Earnings & Valuation

This table compares Sigma-Aldrich and Stepan’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Sigma-Aldrich N/A N/A N/A N/A N/A
Stepan $1.83 billion 1.01 $207.56 million $3.81 21.53

Stepan has higher revenue and earnings than Sigma-Aldrich.

Institutional and Insider Ownership

62.5% of Stepan shares are held by institutional investors. 13.1% of Stepan shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Analyst Recommendations

This is a summary of current ratings and recommmendations for Sigma-Aldrich and Stepan, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Sigma-Aldrich 0 0 0 0 N/A
Stepan 0 3 1 1 2.60

Stepan has a consensus price target of $36.25, suggesting a potential downside of 55.81%. Given Stepan’s higher possible upside, analysts plainly believe Stepan is more favorable than Sigma-Aldrich.

Summary

Stepan beats Sigma-Aldrich on 9 of the 12 factors compared between the two stocks.

About Sigma-Aldrich

Sigma-Aldrich Corporation is a life science and high technology company. The Company develops, manufactures, purchases and distributes a range of biochemical and organic chemical products, kits and services that are used in scientific research. It manufactures and distributes around 250,000 chemicals, biochemical and other essential products and approximately 46,000 equipment products. Its business unit structure is aligned into three business units: Research, Applied and SAFC Commercial. Its brands include Sigma-Aldrich, Sigma, Aldrich, Fluka, Riedel-de Haen, Supelco, SAFC, SAFC Biosciences, SAFC Hitech, Genosys, Proligo, Pharmorphix, Cerilliant, Vetec, BioReliance and Cell Marque. It offers its products and services to research and applied labs, pharmaceutical companies, universities, commercial laboratories, industrial companies, biotechnology companies and non-profit organizations, among others. It operates in around 37 countries and sells into approximately 160 countries.

About Stepan

Stepan Company produces specialty and intermediate chemicals, which are sold to other manufacturers and used in a range of end products. The Company operates through three segments: Surfactants, Polymers and Specialty Products. The Company’s principal markets include manufacturers of cleaning and washing compounds (including detergents, shampoos, fabric softeners, toothpastes and household cleaners), paints, cosmetics, food, beverages, nutritional supplements, agricultural products and plastics. Its Surfactants segment offers products, which are principal ingredients in consumer and industrial cleaning products, such as detergents for washing clothes, dishes, carpets, floors and walls, as well as shampoos and body washes. Its Polymers segment includes polyurethane polyols, polyester resins and phthalic anhydride. Its Specialty Products segment includes flavors, emulsifiers and solubilizers used in food, flavoring, nutritional supplement and pharmaceutical applications.

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