Head to Head Analysis: Salzgitter (OTCMKTS:SZGPY) and Commercial Metals (NYSE:CMC)

Salzgitter (OTCMKTS:SZGPY) and Commercial Metals (NYSE:CMC) are both mid-cap materials companies, but which is the better investment? We will compare the two businesses based on the strength of their earnings, risk, profitability, dividends, analyst recommendations, valuation and institutional ownership.

Profitability

This table compares Salzgitter and Commercial Metals’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Salzgitter	0.65%	1.29%	0.54%
Commercial Metals	6.98%	17.00%	7.85%

Insider & Institutional Ownership

86.9% of Commercial Metals shares are held by institutional investors. 0.6% of Commercial Metals shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Dividends

Salzgitter pays an annual dividend of $0.01 per share and has a dividend yield of 0.2%. Commercial Metals pays an annual dividend of $0.80 per share and has a dividend yield of 1.2%. Salzgitter pays out 8.3% of its earnings in the form of a dividend. Commercial Metals pays out 13.6% 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. Commercial Metals has increased its dividend for 4 consecutive years. Commercial Metals is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Volatility and Risk

Salzgitter has a beta of 1.74, suggesting that its stock price is 74% more volatile than the S&P 500. Comparatively, Commercial Metals has a beta of 1.55, suggesting that its stock price is 55% more volatile than the S&P 500.

Analyst Recommendations

This is a summary of recent ratings and price targets for Salzgitter and Commercial Metals, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Salzgitter	0	2	5	0	2.71
Commercial Metals	1	4	10	0	2.60

Commercial Metals has a consensus target price of $78.73, indicating a potential upside of 22.92%. Given Commercial Metals’ higher possible upside, analysts clearly believe Commercial Metals is more favorable than Salzgitter.

Valuation & Earnings

This table compares Salzgitter and Commercial Metals”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Salzgitter	$10.16 billion	0.31	-$83.95 million	$0.12	47.75
Commercial Metals	$9.39 billion	0.75	$655.85 million	$5.87	10.91

Commercial Metals has lower revenue, but higher earnings than Salzgitter. Commercial Metals is trading at a lower price-to-earnings ratio than Salzgitter, indicating that it is currently the more affordable of the two stocks.

Summary

Commercial Metals beats Salzgitter on 12 of the 17 factors compared between the two stocks.

About Salzgitter

Salzgitter AG is a Germany-based steel and technology group headquartered in Salzgitter. Its businesses include steel production, steel trading, tube manufacturing and technology, serving customers in industries such as automotive, construction, energy and manufacturing. The company produces a range of steel products, including flat and plate steel, and supplies tubes and pipes for industrial applications. Through its technology business, including KHS, Salzgitter also develops filling and packaging systems for the beverage and liquid-food industries.

About Commercial Metals

Commercial Metals Company (CMC) is a metals recycling, manufacturing and construction-services company. Its operations span the collection and processing of ferrous and nonferrous scrap, which can be used as raw material for steelmaking, and the production of steel and other metal products. CMC manufactures products including reinforcing bar, merchant bar, wire rod and other steel products used in construction and industrial applications. The company also provides construction-related products and services, including steel fabrication and engineered solutions for infrastructure projects.