Sumitomo Chemcl (OTCMKTS:SOMMY) and Valhi (NYSE:VHI) Critical Comparison

Valhi (NYSE:VHI) and Sumitomo Chemcl (OTCMKTS:SOMMY) are both basic materials companies, but which is the superior investment? We will contrast the two companies based on the strength of their dividends, analyst recommendations, valuation, profitability, institutional ownership, risk and earnings.

Dividends

Valhi pays an annual dividend of $0.32 per share and has a dividend yield of 2.2%. Sumitomo Chemcl pays an annual dividend of $0.26 per share and has a dividend yield of 1.5%. Valhi pays out 50.0% of its earnings in the form of a dividend. Sumitomo Chemcl pays out 13.3% 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.

Profitability

This table compares Valhi and Sumitomo Chemcl’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Valhi	0.89%	2.22%	1.13%
Sumitomo Chemcl	4.01%	8.61%	2.82%

Insider and Institutional Ownership

3.8% of Valhi shares are owned by institutional investors. 0.2% of Valhi shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.

Valuation & Earnings

This table compares Valhi and Sumitomo Chemcl”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Valhi	$2.10 billion	0.20	$108.00 million	$0.64	23.02
Sumitomo Chemcl	$17.12 billion	0.33	$254.70 million	$1.96	8.74

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

Volatility & Risk

Valhi has a beta of 1.2, suggesting that its share price is 20% more volatile than the S&P 500. Comparatively, Sumitomo Chemcl has a beta of 0.28, suggesting that its share price is 72% less volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of current ratings for Valhi and Sumitomo Chemcl, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Valhi	2	0	0	0	1.00
Sumitomo Chemcl	0	1	0	0	2.00

Valhi presently has a consensus target price of $12.00, indicating a potential downside of 18.55%. Given Valhi’s higher probable upside, equities analysts clearly believe Valhi is more favorable than Sumitomo Chemcl.

Summary

Sumitomo Chemcl beats Valhi on 9 of the 15 factors compared between the two stocks.

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.

About Sumitomo Chemcl

Sumitomo Chemical Company, Limited engages in Chemicals & Plastics, energy and functional materials, IT-related chemicals, health and crop sciences, pharmaceuticals, and other businesses worldwide. Its Essential Chemicals & Plastics segment offers synthetic resins, such as polyethylene, polypropylene, and polymethyl methacrylate resins; raw materials for synthetic fibers; and various industrial chemicals. The company's Energy & Functional Materials segment provides alumina and aluminum products used for energy products; resorcinol for tires, wood adhesives, flame retardants, and ultraviolet ray absorbants; polymer additives and rubber chemicals; synthetic rubber for tires, shoes, construction materials, and other applications; and engineering plastics and lithium-ion secondary battery materials for use in electronic components and next-generation vehicles. Its IT-Related Chemicals segment provides polarizing films, touch screen sensor panels, and color resists and polymer OLED for LC and OLED displays; photoresists and high-purity chemicals for the semiconductor manufacturing process; and compound semiconductor materials for antenna switches and other components of communication terminal equipment. The company's Health & Crop Sciences segment offers crop protection chemicals, fertilizers, feed additives, and household insecticides; active pharmaceutical ingredients and intermediates; and products to control infectious diseases. Its Pharmaceuticals segment provides prescription and diagnostic pharmaceuticals. The company's Others segment supplies electric power and steam; designs, constructs, and supervises chemical plants; provides transportation and warehousing services; and conducts physical property and environmental analysis. Sumitomo Chemical Company, Limited was founded in 1913 and is headquartered in Tokyo, Japan.