Comparing Northern Technologies International (NASDAQ:NTIC) and Valhi (NYSE:VHI)

Northern Technologies International (NASDAQ:NTIC) and Valhi (NYSE:VHI) are both small-cap basic materials companies, but which is the superior investment? We will contrast the two businesses based on the strength of their earnings, valuation, institutional ownership, risk, profitability, dividends and analyst recommendations.

Dividends

Northern Technologies International pays an annual dividend of $0.04 per share and has a dividend yield of 0.5%. Valhi pays an annual dividend of $0.32 per share and has a dividend yield of 2.3%. Northern Technologies International pays out 13.3% of its earnings in the form of a dividend. Valhi pays out 9.3% 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. Valhi is clearly the better dividend stock, given its higher yield and lower payout ratio.

Insider and Institutional Ownership

32.9% of Northern Technologies International shares are held by institutional investors. Comparatively, 3.8% of Valhi shares are held by institutional investors. 24.3% of Northern Technologies International shares are held by insiders. Comparatively, 0.2% of Valhi shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Valuation and Earnings

This table compares Northern Technologies International and Valhi”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Northern Technologies International	$85.27 million	0.83	$5.41 million	$0.30	24.77
Valhi	$2.09 billion	0.19	$108.00 million	$3.43	4.05

Valhi has higher revenue and earnings than Northern Technologies International. Valhi is trading at a lower price-to-earnings ratio than Northern Technologies International, indicating that it is currently the more affordable of the two stocks.

Analyst Ratings

This is a breakdown of recent recommendations for Northern Technologies International and Valhi, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Northern Technologies International	1	0	0	0	1.00
Valhi	1	1	0	0	1.50

Valhi has a consensus target price of $12.00, indicating a potential downside of 13.64%. Given Valhi’s stronger consensus rating and higher possible upside, analysts plainly believe Valhi is more favorable than Northern Technologies International.

Profitability

This table compares Northern Technologies International and Valhi’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Northern Technologies International	3.46%	3.38%	2.66%
Valhi	4.69%	7.02%	3.53%

Volatility & Risk

Northern Technologies International has a beta of 0.31, indicating that its stock price is 69% less volatile than the S&P 500. Comparatively, Valhi has a beta of 1.17, indicating that its stock price is 17% more volatile than the S&P 500.

Summary

Valhi beats Northern Technologies International on 11 of the 15 factors compared between the two stocks.

About Northern Technologies International

Northern Technologies International Corporation develops and markets rust and corrosion inhibiting solutions in North America, South America, Europe, Asia, the Middle East and internationally. It offers rust and corrosion inhibiting products, such as plastic and paper packaging, liquids, coatings, rust removers, cleaners, diffusers, and engineered solutions designed for the oil and gas industry under the ZERUST brand. The company provides a portfolio of bio-based and certified compostable polymer resin compounds and finished products under the Natur-Tec brand. In addition, it offers on-site and technical consulting for rust and corrosion prevention issues. It sells its products and services to automotive, electronics, electrical, mechanical, military, retail consumer, and oil and gas markets through direct sales force, network of independent distributors, agents, manufacturer's sales representatives, and strategic partners. The company was founded in 1970 and is headquartered in Circle Pines, Minnesota.

About Valhi

Valhi, Inc. engages in the chemicals, component products, and real estate management and development businesses in Europe, North America, the Asia Pacific, and internationally. The company’s Chemicals segment produces and markets titanium dioxide pigments (TiO2), which are white inorganic pigments used in various applications by paint, plastics, decorative laminate, and paper manufacturers. It offers TiO2 under the KRONOS name through agents and distributors. The company’s Component Products segment manufactures mechanical and electrical cabinet locks, and other locking mechanisms for use in ignition systems, mailboxes, file cabinets, desk drawers, tool storage cabinets, vending and cash containment machines, integrated inventory and access control secured narcotics boxes, medical cabinetry security, electronic circuit panels, storage compartments, and gas station security applications. It also provides stainless steel exhaust components, gauges, throttle controls, wake enhancement systems, trim tabs, and related hardware and accessories primarily for performance and ski/wakeboard boats. The company’s Real Estate Management and Development segment offers utility services to industrial and municipal customers; owns real properties; and develops land holdings for commercial, industrial, and residential purposes. It also holds marketable securities and other investments. The company was incorporated in 1932 and is based in Dallas, Texas. Valhi, Inc. is a subsidiary of Dixie Rice Agricultural L.L.C.