Gerdau (NYSE:GGB – Get Free Report) and Outokumpu (OTCMKTS:OUTKY – Get Free Report) are both mid-cap basic materials companies, but which is the better investment? We will contrast the two companies based on the strength of their institutional ownership, valuation, earnings, profitability, risk, analyst recommendations and dividends.
Earnings & Valuation
This table compares Gerdau and Outokumpu”s top-line revenue, earnings per share and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio | |
| Gerdau | $69.10 billion | 0.10 | $846.59 million | $0.29 | 12.43 |
| Outokumpu | $6.43 billion | 0.35 | -$43.28 million | ($0.05) | -48.00 |
Analyst Recommendations
This is a summary of current ratings for Gerdau and Outokumpu, as reported by MarketBeat.com.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score | |
| Gerdau | 1 | 2 | 1 | 0 | 2.00 |
| Outokumpu | 2 | 2 | 1 | 0 | 1.80 |
Gerdau currently has a consensus target price of $3.80, suggesting a potential upside of 5.41%. Given Gerdau’s stronger consensus rating and higher possible upside, equities analysts plainly believe Gerdau is more favorable than Outokumpu.
Risk and Volatility
Gerdau has a beta of 1.42, suggesting that its share price is 42% more volatile than the S&P 500. Comparatively, Outokumpu has a beta of 0.7, suggesting that its share price is 30% less volatile than the S&P 500.
Insider and Institutional Ownership
1.5% of Gerdau shares are held by institutional investors. 0.0% of Gerdau shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock is poised for long-term growth.
Dividends
Gerdau pays an annual dividend of $0.07 per share and has a dividend yield of 1.9%. Outokumpu pays an annual dividend of $0.05 per share and has a dividend yield of 2.1%. Gerdau pays out 24.1% of its earnings in the form of a dividend. Outokumpu pays out -100.0% 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. Outokumpu is clearly the better dividend stock, given its higher yield and lower payout ratio.
Profitability
This table compares Gerdau and Outokumpu’s net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets | |
| Gerdau | 4.81% | 6.51% | 4.29% |
| Outokumpu | -0.82% | -1.33% | -0.82% |
Summary
Gerdau beats Outokumpu on 12 of the 15 factors compared between the two stocks.
About Gerdau
Gerdau S.A., together with its subsidiaries, operates as a steel producer company. The company operates through Brazil Business, North America Business, South America Business, and Special Steel Business segments. It also provides semi-finished products, including billets, blooms, and slabs; common long rolled products, such as rebars, wire rods, merchant bars, light shapes, and profiles to the construction and manufacturing industries; drawn products comprising barbed and barbless fence wires, galvanized wires, fences, concrete reinforcing wire mesh, nails, and clamps for manufacturing, construction, and agricultural industries; and special steel products used in auto parts, light and heavy vehicles, and agricultural machinery, as well as in the oil and gas, wind energy, machinery and equipment, mining and rail, and other markets. In addition, the company offers flat products, such as hot-rolled steel coils and heavy plates; and resells flat steel products. Further, it operates mines that produce iron ore located in the Brazilian state of Minas Gerais. The company sells its products through independent distributors, direct sales from the mills, and its retail network. Gerdau S.A. was founded in 1901 and is based in São Paulo, Brazil.
About Outokumpu
Outokumpu Oyj produces and sells various stainless steel products in Finland, other European countries, North America, the Asia-Pacific, and internationally. The company operates through three segments: Europe, Americas, and Ferrochrome. It offers cold rolled coils, strips, and sheets; hot rolled coils, strips, and plates; quarto plates; precision strips; and specialized components, such as welded stainless-steel I-beams, H-beams, hollow-section tubes, bent profiles, structural sections, hardened and customized press plates, suction roll shells, and blancs and disks. The company also provides stainless steel powder which includes Supra 316L, Dura 17-4PH, Ultra 904L, Therma 253MA, Dura 4116, and Ni-free austenitic stainless steel powder; and nickel-based alloys. Its products are used in various applications, including commercial kitchen, cooking, food industry, and home appliances; automotive and transportation; building and infrastructure; energy; marine; and heavy industries. The company was founded in 1910 and is headquartered in Helsinki, Finland.
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