North American Palladium (OTCMKTS:PALDF) and Freeport-McMoRan (NYSE:FCX) are both basic materials companies, but which is the superior business? We will compare the two businesses based on the strength of their valuation, earnings, dividends, risk, profitability, analyst recommendations and institutional ownership.

Analyst Ratings

This is a breakdown of current ratings and price targets for North American Palladium and Freeport-McMoRan, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
North American Palladium 0 0 1 0 3.00
Freeport-McMoRan 0 5 13 0 2.72

Freeport-McMoRan has a consensus target price of $13.00, indicating a potential downside of 0.15%. Given Freeport-McMoRan’s higher probable upside, analysts plainly believe Freeport-McMoRan is more favorable than North American Palladium.

Earnings and Valuation

This table compares North American Palladium and Freeport-McMoRan’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
North American Palladium $306.17 million 2.88 $91.96 million N/A N/A
Freeport-McMoRan $14.40 billion 1.31 -$239.00 million $0.02 651.00

North American Palladium has higher earnings, but lower revenue than Freeport-McMoRan.

Dividends

North American Palladium pays an annual dividend of $0.30 per share and has a dividend yield of 2.0%. Freeport-McMoRan pays an annual dividend of $0.15 per share and has a dividend yield of 1.2%. Freeport-McMoRan pays out 750.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Freeport-McMoRan has increased its dividend for 1 consecutive years.

Profitability

This table compares North American Palladium and Freeport-McMoRan’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
North American Palladium 35.18% 24.49% 20.79%
Freeport-McMoRan -5.05% -1.55% -0.66%

Risk and Volatility

North American Palladium has a beta of 2.08, indicating that its stock price is 108% more volatile than the S&P 500. Comparatively, Freeport-McMoRan has a beta of 2.27, indicating that its stock price is 127% more volatile than the S&P 500.

Insider and Institutional Ownership

71.2% of Freeport-McMoRan shares are held by institutional investors. 1.0% of North American Palladium shares are held by company insiders. Comparatively, 1.0% of Freeport-McMoRan shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.

Summary

North American Palladium beats Freeport-McMoRan on 9 of the 15 factors compared between the two stocks.

About North American Palladium

North American Palladium Ltd. produces precious metals in Canada. It explores for palladium, platinum, gold, nickel, copper, and other metals. It primarily holds interest in the Lac des Iles mine that is located to the northwest of Thunder Bay, Ontario. The company was founded in 1968 and is headquartered in Toronto, Canada.

About Freeport-McMoRan

Freeport-McMoRan, Inc. engages in the mining of copper, gold, and molybdenum. It operates through the following segments: North America Copper Mines; South America Mining; Indonesia Mining; Molybdenum Mines; Rod and Refining; Atlantic Copper Smelting and Refining; and Corporate, Other, and Eliminations. The North America Copper Mines segment operates open-pit copper mines in Morenci, Bagdad, Safford, Sierrita and Miami in Arizona; and Chino and Tyrone in New Mexico. The South America Mining segment includes Cerro Verde in Peru and El Abra in Chile. The Indonesia Mining segment handles the operations of Grasberg minerals district that produces copper concentrate that contains significant quantities of gold and silver. The Molybdenum Mines segment includes the Henderson underground mine and Climax open-pit mine, both in Colorado. The Rod and Refining segment consists of copper conversion facilities located in North America, and includes a refinery, rod mills, and a specialty copper products facility. The Atlantic Copper Smelting and Refining segment smelts and refines copper concentrate and markets refined copper and precious metals in slimes. The Corporate, Other, and Eliminations segment consists of other mining and eliminations, oil and gas operations, and other corporate and elimination items. The company was founded by James R. Moffett on November 10, 1987 and is headquartered in Phoenix, AZ.

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