Commercial Metals (CMC) versus POSCO (NYSE:PKX) Financial Analysis

POSCO (NYSE: PKX) and Commercial Metals (NYSE:CMC) are both mid-cap basic materials companies, but which is the better stock? We will contrast the two businesses based on the strength of their profitabiliy, earnings, analyst recommendations, dividends, institutional ownership, valuation and risk.

Dividends

POSCO pays an annual dividend of $0.55 per share and has a dividend yield of 0.8%. Commercial Metals pays an annual dividend of $0.48 per share and has a dividend yield of 2.4%. POSCO pays out 11.1% of its earnings in the form of a dividend. Commercial Metals pays out 73.8% 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.

Institutional and Insider Ownership

6.1% of POSCO shares are owned by institutional investors. Comparatively, 89.7% of Commercial Metals shares are owned by institutional investors. 0.0% of POSCO shares are owned by company insiders. Comparatively, 1.3% of Commercial Metals shares are owned by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Valuation & Earnings

This table compares POSCO and Commercial Metals’ revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
POSCO $48.51 billion 0.46 $5.82 billion $4.97 14.14
Commercial Metals $4.82 billion 0.48 $306.06 million $0.65 30.78

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

Volatility & Risk

POSCO has a beta of 1.09, meaning that its stock price is 9% more volatile than the S&P 500. Comparatively, Commercial Metals has a beta of 1.23, meaning that its stock price is 23% more volatile than the S&P 500.

Profitability

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

Net Margins Return on Equity Return on Assets
POSCO 3.31% 3.97% 2.48%
Commercial Metals 1.57% 7.84% 3.42%

Analyst Recommendations

This is a breakdown of current ratings for POSCO and Commercial Metals, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
POSCO 0 1 2 0 2.67
Commercial Metals 1 4 3 0 2.25

Commercial Metals has a consensus target price of $21.57, indicating a potential upside of 7.80%. Given Commercial Metals’ higher probable upside, analysts plainly believe Commercial Metals is more favorable than POSCO.

Summary

Commercial Metals beats POSCO on 10 of the 16 factors compared between the two stocks.

About POSCO

POSCO is an integrated steel producer. The Company operates in four segments: steel, trading, engineering and construction, and others. The steel segment includes production of steel products and sale of such products. The trading segment consists of global trading activities of POSCO Daewoo Corporation, exporting and importing a range of steel products that are both obtained from and supplied to it, as well as between other suppliers and purchasers in Korea and overseas. The construction segment includes planning, designing and construction of industrial plants, civil engineering projects, and commercial and residential buildings, both in Korea and overseas. The others segment includes power generation, liquefied natural gas (LNG) logistics, and network and system integration. It produces approximately 42.0 million tons of crude steel, a portion of which is produced at Pohang Works and Gwangyang Works.

About Commercial Metals

Commercial Metals Company, together with its subsidiaries, manufactures, recycles and markets steel and metal products, related materials and services through a network. The Company’s Americas Recycling segment processes scrap metals for use as a raw material by manufacturers of new metal products. The Americas Mills segment consists of steel mills, commonly referred to as minimills that produce reinforcing bar (rebar), angles, flats and rounds. Its Americas Fabrication segment consists of its steel fabrication facilities that bend, weld, cut and fabricate steel, primarily rebar. Its International Mill segment consists of its mill, recycling and fabrication operations located in Poland. Its International Marketing and Distribution segment includes international operations for the sales, distribution and processing of primary and secondary metals, fabricated metals, semi-finished, long and flat steel products, and other industrial products.

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