Contrasting Valhi (NYSE:VHI) & Olin (NYSE:OLN)

Valhi (NYSE:VHI) and Olin (NYSE:OLN) are both basic materials companies, but which is the better business? We will contrast the two companies based on the strength of their dividends, risk, valuation, earnings, institutional ownership, analyst recommendations and profitability.

Analyst Recommendations

This is a breakdown of recent ratings and target prices for Valhi and Olin, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Valhi	2	0	0	0	1.00
Olin	3	11	2	1	2.06

Valhi currently has a consensus price target of $12.00, suggesting a potential downside of 22.58%. Olin has a consensus price target of $22.86, suggesting a potential downside of 8.13%. Given Olin’s stronger consensus rating and higher probable upside, analysts clearly believe Olin is more favorable than Valhi.

Dividends

Valhi pays an annual dividend of $0.32 per share and has a dividend yield of 2.1%. Olin pays an annual dividend of $0.80 per share and has a dividend yield of 3.2%. Valhi pays out 50.0% of its earnings in the form of a dividend. Olin pays out -210.5% 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. Olin is clearly the better dividend stock, given its higher yield and lower payout ratio.

Earnings & Valuation

This table compares Valhi and Olin”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Valhi	$2.06 billion	0.21	$108.00 million	$0.64	24.22
Olin	$6.78 billion	0.42	-$42.80 million	($0.38)	-65.47

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

Insider and Institutional Ownership

3.8% of Valhi shares are owned by institutional investors. Comparatively, 88.7% of Olin shares are owned by institutional investors. 0.2% of Valhi shares are owned by insiders. Comparatively, 1.6% of Olin shares are owned 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.

Profitability

This table compares Valhi and Olin’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%
Olin	-0.63%	-0.47%	-0.12%

Volatility and Risk

Valhi has a beta of 1.2, meaning that its share price is 20% more volatile than the S&P 500. Comparatively, Olin has a beta of 1.64, meaning that its share price is 64% more volatile than the S&P 500.

Summary

Olin beats Valhi on 11 of the 17 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 Olin

Olin Corporation manufactures and distributes chemical products in the United States, Europe, Asia Pacific, Latin America, and Canada. It operates through three segments: Chlor Alkali Products and Vinyls; Epoxy; and Winchester. The Chlor Alkali Products and Vinyls segment offers chlorine and caustic soda, ethylene dichloride and vinyl chloride monomers, methyl chloride, methylene chloride, chloroform, carbon tetrachloride, perchloroethylene, hydrochloric acid, hydrogen, bleach products, potassium hydroxide, and chlorinated organics intermediates and solvents. The Epoxy segment provides Allylics, such as allyl chloride, epichlorohydrin, and glycerin; aromatics, including acetone, bisphenol, cumene, and phenol; liquid and solid epoxy resins; and converted epoxy resins and additives. The Winchester segment offers sporting ammunition products, including shotshells, small caliber centerfire, and rimfire ammunition products for hunters and recreational shooters, and law enforcement agencies; small caliber military ammunition products for use in infantry and mounted weapons; and industrial products comprising gauge loads and powder-actuated tool loads for maintenance applications in power and concrete industries, and powder-actuated tools in construction industry. The company markets its products through its sales force, as well as directly to various industrial customers, mass merchants, retailers, wholesalers, gun clubs, other distributors, and the U.S. Government and its prime contractors. Olin Corporation was incorporated in 1892 and is based in Clayton, Missouri.