Comparing Shin-Etsu Chemical (OTCMKTS:SHECY) and Stepan (NYSE:SCL)

Shin-Etsu Chemical (OTCMKTS:SHECY) and Stepan (NYSE:SCL) are both materials companies, but which is the better investment? We will contrast the two companies based on the strength of their analyst recommendations, institutional ownership, earnings, profitability, valuation, dividends and risk.

Volatility & Risk

Shin-Etsu Chemical has a beta of 1.41, suggesting that its stock price is 41% more volatile than the S&P 500. Comparatively, Stepan has a beta of 0.91, suggesting that its stock price is 9% less volatile than the S&P 500.

Earnings & Valuation

This table compares Shin-Etsu Chemical and Stepan”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Shin-Etsu Chemical	$17.10 billion	4.20	$3.15 billion	$0.86	21.02
Stepan	$2.53 billion	0.59	$46.90 million	$0.19	348.61

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

Profitability

This table compares Shin-Etsu Chemical and Stepan’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Shin-Etsu Chemical	18.57%	10.90%	8.97%
Stepan	0.17%	4.81%	2.47%

Analyst Recommendations

This is a summary of current ratings and target prices for Shin-Etsu Chemical and Stepan, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Shin-Etsu Chemical	0	1	0	0	2.00
Stepan	1	1	0	0	1.50

Insider and Institutional Ownership

0.0% of Shin-Etsu Chemical shares are owned by institutional investors. Comparatively, 82.7% of Stepan shares are owned by institutional investors. 6.6% of Stepan shares are owned by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock is poised for long-term growth.

Dividends

Shin-Etsu Chemical pays an annual dividend of $0.20 per share and has a dividend yield of 1.1%. Stepan pays an annual dividend of $1.62 per share and has a dividend yield of 2.4%. Shin-Etsu Chemical pays out 23.3% of its earnings in the form of a dividend. Stepan pays out 852.6% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Stepan has raised its dividend for 57 consecutive years. Stepan is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

Shin-Etsu Chemical beats Stepan on 10 of the 15 factors compared between the two stocks.

About Shin-Etsu Chemical

Shin-Etsu Chemical Co., Ltd. is a Japan-based chemical manufacturer founded in 1926. The company develops and produces materials used in construction, electronics, healthcare, and other industries. Its products include polyvinyl chloride (PVC) and other infrastructure materials; semiconductor silicon wafers and photomask substrates; silicones; and cellulose derivatives used in applications such as pharmaceuticals and food products. Headquartered in Tokyo, Shin-Etsu serves customers around the world through manufacturing and sales operations in Japan and other international markets.

About Stepan

Stepan Company is a global manufacturer of specialty and intermediate chemicals. Founded in 1932, the company develops and produces materials used by businesses across a range of consumer and industrial markets. Its products include surfactants used in cleaning, personal care, agricultural and other applications, as well as polymer products such as polyols used in insulation, coatings and related markets. Stepan also makes specialty chemicals for applications including oilfield services and emulsion polymerization.