Arkema (OTCMKTS:ARKAY) vs. Tronox (NYSE:TROX) Critical Contrast

Arkema (OTCMKTS:ARKAY) and Tronox (NYSE:TROX) 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, valuation, earnings, profitability, analyst recommendations, dividends and risk.

Insider and Institutional Ownership

73.4% of Tronox shares are owned by institutional investors. 1.7% of Tronox shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock will outperform the market over the long term.

Analyst Ratings

This is a breakdown of recent recommendations and price targets for Arkema and Tronox, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Arkema	3	3	2	0	1.88
Tronox	2	5	5	0	2.25

Tronox has a consensus target price of $6.40, suggesting a potential downside of 29.72%. Given Tronox’s stronger consensus rating and higher probable upside, analysts clearly believe Tronox is more favorable than Arkema.

Risk and Volatility

Arkema has a beta of 0.84, indicating that its share price is 16% less volatile than the S&P 500. Comparatively, Tronox has a beta of 0.93, indicating that its share price is 7% less volatile than the S&P 500.

Dividends

Arkema pays an annual dividend of $3.03 per share and has a dividend yield of 4.3%. Tronox pays an annual dividend of $0.20 per share and has a dividend yield of 2.2%. Arkema pays out 348.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Tronox pays out -6.7% of its earnings in the form of a dividend.

Earnings & Valuation

This table compares Arkema and Tronox”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Arkema	$10.26 billion	0.52	$71.28 million	$0.87	80.20
Tronox	$2.90 billion	0.50	-$470.00 million	($2.97)	-3.07

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

Profitability

This table compares Arkema and Tronox’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Arkema	0.65%	4.44%	2.31%
Tronox	-16.22%	-14.75%	-3.83%

Summary

Arkema beats Tronox on 9 of the 16 factors compared between the two stocks.

About Arkema

Arkema S.A. manufactures and sells specialty chemicals and advanced materials worldwide. The company operates in three segments: Adhesive Solutions, Advanced Materials and Coating Solutions, and Intermediates. The Adhesive Solutions segment provides solutions for construction, renovation of buildings, DIY, durable goods, and packaging and non-woven applications; and supplies technologies used in building activities for businesses and individuals, including sealants, tiles, flooring adhesives and waterproofing systems, and technologies used in industry, which include automotive, textiles, glazing, flexible and rigid packaging, and hygiene markets. This segment also offers performance polymers, such as specialty polyamides, PVDF, polyimides, fluorospecialties, and polyetherketoneketone; and performance additives which includes molecular sieves, organic peroxides, thiochemicals, and hydrogen peroxide. The Advance Materials and Coating Solutions segment offers coating solutions, including comprising EU/US acrylics and coating resins; coating additives, such as sartomer photocure resins and coatex rheology additives. This segment also provides decorative paints, industrial coatings, and adhesives; and solutions for applications in the paper, superabsorbent, water treatment and oil and gas extraction, and 3D printing and electronics industries. The Intermediates segment provides fluorogases and acrylics; and industrial intermediate chemicals used in construction, refrigeration and air conditioning, automotive, coatings, and water treatment sectors. Arkema S.A. was incorporated in 2003 and is headquartered in Colombes, France.

About Tronox

Tronox Holdings plc operates as a vertically integrated manufacturer of TiO2 pigment in North America, South and Central America, Europe, the Middle East, Africa, and the Asia Pacific. The company operates titanium-bearing mineral sand mines; and engages in beneficiation and smelting operations. It offers TiO2 pigment; ultrafine specialty TiO2; zircon; feedstock; pig iron; monazite; titanium tetrachloride; and other products. The company’s products are used for the manufacture of paints, coatings, plastics, and paper, as well as various other applications. Tronox Holdings plc is based in Stamford, Connecticut.