Head to Head Contrast: Cabot (NYSE:CBT) vs. Tronox (NYSE:TROX)

Cabot (NYSE:CBT) and Tronox (NYSE:TROX) are both basic materials companies, but which is the better stock? We will contrast the two businesses based on the strength of their earnings, valuation, risk, institutional ownership, profitability, analyst recommendations and dividends.

Risk and Volatility

Cabot has a beta of 0.89, suggesting that its stock price is 11% less volatile than the S&P 500. Comparatively, Tronox has a beta of 1.16, suggesting that its stock price is 16% more volatile than the S&P 500.

Insider and Institutional Ownership

93.2% of Cabot shares are owned by institutional investors. Comparatively, 73.4% of Tronox shares are owned by institutional investors. 3.0% of Cabot shares are owned by insiders. Comparatively, 1.7% of Tronox shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Cabot	8.91%	24.55%	10.57%
Tronox	-11.39%	-8.10%	-2.23%

Dividends

Cabot pays an annual dividend of $1.80 per share and has a dividend yield of 2.6%. Tronox pays an annual dividend of $0.20 per share and has a dividend yield of 4.0%. Cabot pays out 30.0% of its earnings in the form of a dividend. Tronox pays out -9.8% 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. Cabot has increased its dividend for 14 consecutive years. Tronox is clearly the better dividend stock, given its higher yield and lower payout ratio.

Analyst Ratings

This is a summary of current ratings for Cabot and Tronox, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Cabot	2	2	1	0	1.80
Tronox	3	3	5	0	2.18

Cabot presently has a consensus target price of $66.33, indicating a potential downside of 5.38%. Tronox has a consensus target price of $5.18, indicating a potential upside of 3.56%. Given Tronox’s stronger consensus rating and higher possible upside, analysts clearly believe Tronox is more favorable than Cabot.

Earnings & Valuation

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

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Cabot	$3.71 billion	1.00	$331.00 million	$6.01	11.67
Tronox	$3.07 billion	0.26	-$48.00 million	($2.05)	-2.44

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

Summary

Cabot beats Tronox on 11 of the 17 factors compared between the two stocks.

About Cabot

Cabot Corporation operates as a specialty chemicals and performance materials company. The company operates through two segments, Reinforcement Materials and Performance Chemicals. It offers reinforcing carbons that are used in tires as a rubber reinforcing agent and performance additive, as well as in industrial products, such as hoses, belts, extruded profiles, and molded goods; and engineered elastomer composites solutions. The company also provides specialty carbons for use in inks, coatings, plastics, adhesives, toners, batteries, and displays; conductive additives and fumed alumina used in lead acid and lithium-ion batteries for electric vehicles; fumed silica used in adhesives, sealants, cosmetics, batteries, inks, toners, silicone elastomers, coatings, polishing slurries, and pharmaceuticals; and fumed alumina for use in various products, including inkjet media, lighting, coatings, cosmetics, and polishing slurries. In addition, it offers aerogel, a hydrophobic, silica-based particle to use in various thermal insulation and specialty chemical applications; masterbatch and conductive compound products that are used in automotive, industrial, packaging, infrastructure, agriculture, consumer products, and electronics industries; and inkjet colorants for inkjet printing applications. The company sells its products through distributors and sales representatives in the Americas, Europe, the Middle East, Africa, and the Asia Pacific. Cabot Corporation was founded in 1882 and is headquartered in Boston, Massachusetts.

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.