Head to Head Comparison: Shin-Etsu Chemical (OTCMKTS:SHECY) and Stepan (NYSE:SCL)

Stepan (NYSE:SCL) and Shin-Etsu Chemical (OTCMKTS:SHECY) are both materials companies, but which is the better investment? We will contrast the two companies based on the strength of their risk, earnings, analyst recommendations, institutional ownership, valuation, dividends and profitability.

Profitability

This table compares Stepan and Shin-Etsu Chemical’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Stepan	0.17%	4.81%	2.47%
Shin-Etsu Chemical	18.57%	10.90%	8.97%

Valuation and Earnings

This table compares Stepan and Shin-Etsu Chemical”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Stepan	$2.33 billion	0.66	$46.90 million	$0.19	356.14
Shin-Etsu Chemical	$17.10 billion	3.96	$3.15 billion	$0.86	19.85

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

Dividends

Stepan pays an annual dividend of $1.58 per share and has a dividend yield of 2.3%. Shin-Etsu Chemical pays an annual dividend of $0.19 per share and has a dividend yield of 1.1%. Stepan pays out 831.6% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Shin-Etsu Chemical pays out 22.1% of its earnings in the form of a dividend. Stepan has increased its dividend for 57 consecutive years. Stepan is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Recommendations

This is a summary of current ratings and recommmendations for Stepan and Shin-Etsu Chemical, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Stepan	1	1	0	0	1.50
Shin-Etsu Chemical	0	1	0	0	2.00

Insider & Institutional Ownership

82.7% of Stepan shares are owned by institutional investors. Comparatively, 0.0% of Shin-Etsu Chemical shares are owned by institutional investors. 6.6% of Stepan shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.

Risk & Volatility

Stepan has a beta of 0.91, meaning that its stock price is 9% less volatile than the S&P 500. Comparatively, Shin-Etsu Chemical has a beta of 1.41, meaning that its stock price is 41% more volatile than the S&P 500.

Summary

Shin-Etsu Chemical beats Stepan on 10 of the 15 factors compared between the two stocks.

About Stepan

Stepan Company, together with its subsidiaries, produces and sells specialty and intermediate chemicals to other manufacturers for use in various end products worldwide. It operates through three segments: Surfactants, Polymers, and Specialty Products. The Surfactants segment offers surfactants that are used in consumer and industrial cleaning and disinfection products, including detergents for washing clothes, dishes, carpets, and floors and walls, as well as shampoos and body washes; and other applications, such as fabric softeners, germicidal quaternary compounds, disinfectants, and lubricating ingredients. Its surfactants are also used in various applications, including emulsifiers for spreading agricultural products; and industrial applications comprising latex systems, plastics, and composites. The Polymers segment provides polyurethane polyols that are used in the manufacture of rigid foam for thermal insulation in the construction industry, as well as a base raw material for coatings, adhesives, sealants, and elastomers (CASE); polyester resins, including liquid and powdered products, which are used in CASE applications; and phthalic anhydride that is used in unsaturated polyester resins, alkyd resins, and plasticizers for applications in construction materials, as well as components of automotive, boating, and other consumer products. The Specialty Products segment offers flavors, emulsifiers, and solubilizers for use in food, flavoring, nutritional supplement, and pharmaceutical applications. Stepan Company was founded in 1932 and is headquartered in Northbrook, Illinois.

About Shin-Etsu Chemical

Shin-Etsu Chemical Co., Ltd. provides infrastructure, electronics, and functional materials in Japan. It is also involved in processing and specialized related services. The company operates through Infrastructure Materials; Electronics Materials; Functional Materials; and Processing and Specialized Services segments. In addition, it offers cellulose derivatives, synthetic pheromones, aroma chemicals, dielectric and LED/ semiconductor materials, silanes, photoresists, chlorides, caustic soda, liquid fluoroelastomers, polyvinyl chloride and vinyl acetate resin, silicones, and silicones processed goods. Further, the company offers pellicles, photomask blanks, synthetic quartz/ quartz cloth, pyrolytic boron nitride, LIB anode material, and silicon metal. Additionally, it provides rare earth magnets, compound semiconductors, and oxide single crystals. The company was formerly known as Shin-Etsu Nitrogen Fertilizer Co., Ltd. and changed its name to Shin-Etsu Chemical Co., Ltd. in 1940. Shin-Etsu Chemical Co., Ltd. was incorporated in 1926 and is headquartered in Tokyo, Japan.