Comparing Commercial Metals (NYSE:CMC) & Franco-Nevada (NYSE:FNV)

Commercial Metals (NYSE:CMC) and Franco-Nevada (NYSE:FNV) are both materials companies, but which is the superior investment? We will contrast the two businesses based on the strength of their institutional ownership, profitability, earnings, risk, valuation, dividends and analyst recommendations.

Valuation & Earnings

This table compares Commercial Metals and Franco-Nevada”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Commercial Metals	$9.39 billion	0.78	$655.85 million	$5.87	11.34
Franco-Nevada	$1.82 billion	25.66	$1.11 billion	$7.65	31.69

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

Profitability

This table compares Commercial Metals and Franco-Nevada’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Commercial Metals	6.98%	17.00%	7.85%
Franco-Nevada	63.79%	18.58%	17.19%

Volatility and Risk

Commercial Metals has a beta of 1.55, meaning that its stock price is 55% more volatile than the S&P 500. Comparatively, Franco-Nevada has a beta of 0.34, meaning that its stock price is 66% less volatile than the S&P 500.

Insider and Institutional Ownership

86.9% of Commercial Metals shares are held by institutional investors. Comparatively, 77.1% of Franco-Nevada shares are held by institutional investors. 0.6% of Commercial Metals shares are held by company insiders. Comparatively, 0.7% of Franco-Nevada shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Dividends

Commercial Metals pays an annual dividend of $0.80 per share and has a dividend yield of 1.2%. Franco-Nevada pays an annual dividend of $1.76 per share and has a dividend yield of 0.7%. Commercial Metals pays out 13.6% of its earnings in the form of a dividend. Franco-Nevada pays out 23.0% 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. Commercial Metals has raised its dividend for 4 consecutive years and Franco-Nevada has raised its dividend for 18 consecutive years. Commercial Metals is clearly the better dividend stock, given its higher yield and lower payout ratio.

Analyst Ratings

This is a breakdown of recent ratings and price targets for Commercial Metals and Franco-Nevada, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Commercial Metals	1	4	10	0	2.60
Franco-Nevada	0	4	10	0	2.71

Commercial Metals currently has a consensus target price of $78.73, indicating a potential upside of 18.26%. Franco-Nevada has a consensus target price of $275.30, indicating a potential upside of 13.56%. Given Commercial Metals’ higher probable upside, equities research analysts clearly believe Commercial Metals is more favorable than Franco-Nevada.

Summary

Franco-Nevada beats Commercial Metals on 10 of the 16 factors compared between the two stocks.

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.

About Franco-Nevada

Franco-Nevada Corporation operates as a gold-focused royalty and streaming company in South America, Central America, Mexico, the United States, Canada, and internationally. It operates through Mining and Energy segments. The company manages its portfolio with a focus on precious metals, such as gold, silver, and platinum group metals; and engages in the sale of crude oil, natural gas, and natural gas liquids through a third-party marketing agent. Franco-Nevada Corporation was founded in 1986 and is headquartered in Toronto, Canada.