Analyzing Nippon Steel & Sumitomo Metal (OTCMKTS:NPSCY) & Commercial Metals (NYSE:CMC)

Nippon Steel & Sumitomo Metal (OTCMKTS:NPSCY) and Commercial Metals (NYSE:CMC) are both basic materials companies, but which is the superior business? We will compare the two businesses based on the strength of their institutional ownership, analyst recommendations, dividends, profitability, valuation, risk and earnings.

Institutional & Insider Ownership

86.9% of Commercial Metals shares are held by institutional investors. 0.5% of Commercial Metals shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company will outperform the market over the long term.

Analyst Recommendations

This is a summary of current recommendations for Nippon Steel & Sumitomo Metal and Commercial Metals, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Nippon Steel & Sumitomo Metal	0	0	0	0	0.00
Commercial Metals	0	6	6	1	2.62

Commercial Metals has a consensus price target of $63.80, indicating a potential upside of 5.41%. Given Commercial Metals’ stronger consensus rating and higher possible upside, analysts clearly believe Commercial Metals is more favorable than Nippon Steel & Sumitomo Metal.

Profitability

This table compares Nippon Steel & Sumitomo Metal and Commercial Metals’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Nippon Steel & Sumitomo Metal	-0.42%	-0.61%	-0.30%
Commercial Metals	1.09%	8.76%	5.17%

Risk & Volatility

Nippon Steel & Sumitomo Metal has a beta of 0.71, suggesting that its stock price is 29% less volatile than the S&P 500. Comparatively, Commercial Metals has a beta of 1.32, suggesting that its stock price is 32% more volatile than the S&P 500.

Valuation and Earnings

This table compares Nippon Steel & Sumitomo Metal and Commercial Metals”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Nippon Steel & Sumitomo Metal	$57.10 billion	0.40	$2.31 billion	($0.02)	-210.00
Commercial Metals	$7.80 billion	0.86	$84.66 million	$0.76	79.64

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

Dividends

Nippon Steel & Sumitomo Metal pays an annual dividend of $0.15 per share and has a dividend yield of 3.6%. Commercial Metals pays an annual dividend of $0.72 per share and has a dividend yield of 1.2%. Nippon Steel & Sumitomo Metal pays out -750.0% of its earnings in the form of a dividend. Commercial Metals pays out 94.7% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Commercial Metals has increased its dividend for 4 consecutive years. Nippon Steel & Sumitomo Metal is clearly the better dividend stock, given its higher yield and lower payout ratio.

Summary

Commercial Metals beats Nippon Steel & Sumitomo Metal on 14 of the 18 factors compared between the two stocks.

About Nippon Steel & Sumitomo Metal

Nippon Steel Corporation engages in steelmaking and steel fabrication, engineering and construction, chemicals and materials, and system solutions businesses in Japan and internationally. The company offers steel plates, sheets, and slags; bar and rod materials; structural steel; pipes and tubes; titanium and stainless products; and railway, automotive, and machinery parts for applications in automotive, energy, infrastructure, and consumer electronics markets. It is also involved in construction; waste processing and recycling; supplying electricity, gas, and heat; and the provision of coal-based chemical products, petrochemicals, electronic materials, materials and components for semiconductors and electronic parts, carbon fiber, and composite products. In addition, the company offers computer systems engineering and consulting, IT-enabled outsourcing, and other services. The company was formerly known as Nippon Steel & Sumitomo Metal Corporation and changed its name to Nippon Steel Corporation in April 2019. The company was incorporated in 1950 and is headquartered in Tokyo, Japan.

About Commercial Metals

Commercial Metals Company manufactures, recycles, and fabricates steel and metal products, and related materials and services in the United States, Poland, China, and internationally. It operates through two segments, North America and Europe. The company processes and sells ferrous and nonferrous scrap metals to steel mills and foundries, aluminum sheet and ingot manufacturers, brass and bronze ingot makers, copper refineries and mills, secondary lead smelters, specialty steel mills, high temperature alloy manufacturers, and other consumers. It also manufactures and sells finished long steel products, including reinforcing bar, merchant bar, light structural, and other special sections, as well as semi-finished billets for rerolling and forging applications. In addition, the company provides fabricated rebar used to reinforce concrete primarily in the construction of commercial and non-commercial buildings, hospitals, convention centers, industrial plants, power plants, highways, bridges, arenas, stadiums, and dams; sells and rents construction-related products and equipment to concrete installers and other businesses; and manufactures and sells strength bars for the truck trailer industry, special bar steels for the energy market, and armor plates for military vehicles. Further, it manufactures rebars, merchant bars, and wire rods; and sells fabricated rebars, wire meshes, fabricated meshes, assembled rebar cages, and other fabricated rebar by-products to fabricators, manufacturers, distributors, and construction companies. The company was founded in 1915 and is headquartered in Irving, Texas.