Analyzing Avient (NYSE:AVNT) and Stepan (NYSE:SCL)

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

Volatility & Risk

Stepan has a beta of 0.95, meaning that its stock price is 5% less volatile than the S&P 500. Comparatively, Avient has a beta of 1.27, meaning that its stock price is 27% more volatile than the S&P 500.

Earnings & Valuation

This table compares Stepan and Avient”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Stepan	$2.33 billion	0.54	$46.90 million	($0.62)	-90.24
Avient	$3.26 billion	1.03	$81.90 million	$1.72	21.33

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

Dividends

Stepan pays an annual dividend of $1.58 per share and has a dividend yield of 2.8%. Avient pays an annual dividend of $1.10 per share and has a dividend yield of 3.0%. Stepan pays out -254.8% of its earnings in the form of a dividend. Avient pays out 64.0% 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. Stepan has increased its dividend for 57 consecutive years and Avient has increased its dividend for 1 consecutive years.

Profitability

This table compares Stepan and Avient’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Stepan	-0.61%	2.65%	1.37%
Avient	4.81%	11.11%	4.40%

Institutional and Insider Ownership

82.7% of Stepan shares are owned by institutional investors. Comparatively, 95.5% of Avient shares are owned by institutional investors. 6.6% of Stepan shares are owned by company insiders. Comparatively, 0.9% of Avient shares are owned by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Analyst Recommendations

This is a breakdown of current ratings for Stepan and Avient, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Stepan	2	0	0	0	1.00
Avient	0	4	3	0	2.43

Avient has a consensus target price of $45.71, indicating a potential upside of 24.58%. Given Avient’s stronger consensus rating and higher probable upside, analysts plainly believe Avient is more favorable than Stepan.

Summary

Avient beats Stepan on 14 of the 17 factors compared between the two stocks.

About Stepan

Stepan Company, together with its subsidiaries, produces and sells specialty and intermediate chemicals to other manufacturers for use in various end products worldwide. It operates through three segments: Surfactants, Polymers, and Specialty Products. The Surfactants segment offers surfactants that are used in consumer and industrial cleaning and disinfection products, including detergents for washing clothes, dishes, carpets, and floors and walls, as well as shampoos and body washes; and other applications, such as fabric softeners, germicidal quaternary compounds, disinfectants, and lubricating ingredients. Its surfactants are also used in various applications, including emulsifiers for spreading agricultural products; and industrial applications comprising latex systems, plastics, and composites. The Polymers segment provides polyurethane polyols that are used in the manufacture of rigid foam for thermal insulation in the construction industry, as well as a base raw material for coatings, adhesives, sealants, and elastomers (CASE); polyester resins, including liquid and powdered products, which are used in CASE applications; and phthalic anhydride that is used in unsaturated polyester resins, alkyd resins, and plasticizers for applications in construction materials, as well as components of automotive, boating, and other consumer products. The Specialty Products segment offers flavors, emulsifiers, and solubilizers for use in food, flavoring, nutritional supplement, and pharmaceutical applications. Stepan Company was founded in 1932 and is headquartered in Northbrook, Illinois.

About Avient

Avient Corporation operates as a formulator of material solutions in the United States, Canada, Mexico, Europe, South America, and Asia. It operates in two segments, Color, Additives and Inks; and Specialty Engineered Materials. The Color, Additives and Inks segment offers custom color and additive concentrates in solid and liquid form for thermoplastics, dispersions for thermosets, and specialty inks; custom-formulated liquid system, such as polyester, vinyl, natural rubber and latex, polyurethane, and silicone; and proprietary inks. Its products are used in medical and pharmaceutical devices, food packaging, personal care and cosmetics, transportation, building products, wire and cable, recreational and athletic apparel, construction and filtration, outdoor furniture, healthcare, textiles and appliances, and industrial markets. The Specialty Engineered Materials segment provides specialty polymer formulations, services, and solutions for designers, assemblers, and processors of thermoplastic materials. It sells its products through direct sales personnel, distributors, and commissioned sales agents. The company was formerly known as PolyOne Corporation and changed its name to Avient Corporation in June 2020. Avient Corporation was founded in 1885 and is headquartered in Avon Lake, Ohio.