Kraton (NYSE: KRA) and Ferro (NYSE:FOE) are both small-cap basic materials companies, but which is the superior business? We will compare the two companies based on the strength of their profitability, valuation, earnings, institutional ownership, analyst recommendations, risk and dividends.

Insider & Institutional Ownership

97.1% of Kraton shares are held by institutional investors. Comparatively, 97.7% of Ferro shares are held by institutional investors. 4.7% of Kraton shares are held by company insiders. Comparatively, 2.0% of Ferro shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Valuation & Earnings

This table compares Kraton and Ferro’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Kraton $1.74 billion 0.84 $107.30 million $0.76 61.30
Ferro $1.15 billion 1.53 -$20.81 million $0.53 39.47

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

Profitability

This table compares Kraton and Ferro’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Kraton 1.27% 14.19% 2.56%
Ferro 3.44% 35.77% 7.57%

Analyst Recommendations

This is a breakdown of current ratings and target prices for Kraton and Ferro, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Kraton 0 1 2 0 2.67
Ferro 0 0 4 0 3.00

Kraton currently has a consensus target price of $60.00, indicating a potential upside of 28.78%. Ferro has a consensus target price of $23.00, indicating a potential upside of 9.94%. Given Kraton’s higher probable upside, equities research analysts plainly believe Kraton is more favorable than Ferro.

Volatility and Risk

Kraton has a beta of 1.13, indicating that its stock price is 13% more volatile than the S&P 500. Comparatively, Ferro has a beta of 1.72, indicating that its stock price is 72% more volatile than the S&P 500.

Summary

Ferro beats Kraton on 8 of the 14 factors compared between the two stocks.

Kraton Company Profile

Kraton Corporation, formerly Kraton Performance Polymers, Inc., is a specialty chemicals company. The Company manufactures styrenic block copolymers (SBCs) and other engineered polymers. The Company also produces specialty products primarily derived from pine wood pulping co-products. The Company operates through two segments: Polymer Segment, which comprises SBCs and other engineered polymers business, and Chemical Segment, which comprises pine-based specialty products business. Its SBCs are used in a range of applications, including adhesives, coatings, consumer and personal care products, sealants, lubricants, medical, packaging, automotive, paving, roofing and footwear products. The Company also sells isoprene rubber (IR) and isoprene rubber latex (IRL), which are non-SBC products primarily used in applications, such as medical products, personal care, adhesives, tackifiers, paints and coatings. It offers crude tall oil (CTO) and crude sulfate turpentine (CST).

Ferro Company Profile

Ferro Corporation (Ferro) produces specialty materials that are sold to a range of manufacturers. The Company’s segments include Performance Coatings (metal and ceramic coatings), Performance Colors and Glass (glass coatings), and Color Solutions. Its Performance Coatings segment includes Tile Coating Systems and Porcelain Enamel. Its manufacturers make products for various end-use markets. The Company’s products fall into two general categories: functional coatings, which perform specific functions in the manufacturing processes and end products of its customers, and color solutions, which provide aesthetic and performance characteristics to its customers’ products. Its products are used in a range of product applications in markets, including appliances, automobiles, building and renovation, electronics, household furnishings, industrial products and packaging.

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