Critical Contrast: Ternium (TX) and Aperam (APEMY)

Ternium (NYSE: TX) and Aperam (OTCMKTS:APEMY) are both mid-cap basic materials companies, but which is the better business? We will compare the two businesses based on the strength of their dividends, profitability, valuation, analyst recommendations, institutional ownership, earnings and risk.

Institutional & Insider Ownership

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19.0% of Ternium shares are held by institutional investors. Comparatively, 0.0% of Aperam shares are held by institutional investors. 0.0% of Ternium shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Dividends

Ternium pays an annual dividend of $1.00 per share and has a dividend yield of 2.8%. Aperam pays an annual dividend of $1.34 per share and has a dividend yield of 2.7%. Ternium pays out 22.2% of its earnings in the form of a dividend. Aperam pays out 31.2% 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. Ternium is clearly the better dividend stock, given its higher yield and lower payout ratio.

Profitability

This table compares Ternium and Aperam’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Ternium 9.28% 15.65% 8.50%
Aperam 7.15% 11.99% 6.37%

Earnings & Valuation

This table compares Ternium and Aperam’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Ternium $9.70 billion 0.74 $886.21 million $4.51 7.98
Aperam $5.05 billion 0.83 $361.00 million $4.29 11.46

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

Volatility & Risk

Ternium has a beta of 1.15, meaning that its stock price is 15% more volatile than the S&P 500. Comparatively, Aperam has a beta of 2.23, meaning that its stock price is 123% more volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of current recommendations for Ternium and Aperam, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Ternium 0 1 4 0 2.80
Aperam 0 0 0 0 N/A

Ternium currently has a consensus price target of $34.00, suggesting a potential downside of 5.48%. Given Ternium’s higher probable upside, research analysts plainly believe Ternium is more favorable than Aperam.

Summary

Ternium beats Aperam on 12 of the 15 factors compared between the two stocks.

Ternium Company Profile

Ternium S.A. manufactures and processes various steel products in Mexico, Argentina, Bolivia, Chile, Paraguay, Uruguay, Colombia, the United States, Central America, and internationally. The company operates in two segments, Steel and Mining. The Steel segment offers steel products, such as slabs, billets and round bars, hot-rolled coils and sheets, bars and stirrups, wire rods, cold-rolled coils and sheets, tin plates, hot dipped galvanized and electrogalvanized sheets, pre-painted sheets, steel pipes and tubular products, beams, roll formed products, and other products. The Mining segment sells iron ore concentrates and pellets. The company serves various companies and small businesses operating in construction, automotive, home appliances, capital goods, container, food, and energy industries. Ternium S.A. was founded in 1961 and is headquartered in Buenos Aires, Argentina. Ternium S.A. is a subsidiary of Techint Holdings S.à r.l.

Aperam Company Profile

Aperam produces and sells stainless and specialty steel products worldwide. It operates through three segments: Stainless & Electrical Steel, Services & Solutions, and Alloys & Specialties. The company offers steel products and electrical steels, including grain oriented, non-grain oriented, and non-grain oriented semi-processed steel products. It is also involved in the selling and distribution operations; and the provision of value added and customized steel solutions. In addition, the company designs, produces, and transforms nickel and cobalt alloys, and other specific stainless steels in various forms, such as bars, semis, cold-rolled strips, wire and wire rods, and plates. It serves customers in automotive, construction, catering, medical, oil and gas, aerospace, industrial processes, electronic, and electrical engineering industries. The company distributes its products through a network of service centers, transformation facilities, and sales offices. Aperam was incorporated in 2010 and is headquartered in Luxembourg.

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