Financial Analysis: Valhi (NYSE:VHI) vs. Resonac (OTCMKTS:SHWDY)

Valhi (NYSE:VHI) and Resonac (OTCMKTS:SHWDY) are both basic materials companies, but which is the superior business? We will contrast the two businesses based on the strength of their institutional ownership, valuation, profitability, risk, dividends, earnings and analyst recommendations.

Profitability

This table compares Valhi and Resonac’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Valhi	-3.45%	-4.29%	-2.23%
Resonac	2.59%	4.89%	1.65%

Volatility and Risk

Valhi has a beta of 0.96, meaning that its stock price is 4% less volatile than the S&P 500. Comparatively, Resonac has a beta of 0.6, meaning that its stock price is 40% less volatile than the S&P 500.

Insider and Institutional Ownership

3.8% of Valhi shares are owned by institutional investors. 0.2% of Valhi shares are owned by 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.

Dividends

Valhi pays an annual dividend of $0.32 per share and has a dividend yield of 2.3%. Resonac pays an annual dividend of $0.55 per share and has a dividend yield of 0.6%. Valhi pays out -12.6% of its earnings in the form of a dividend. Resonac pays out 44.7% 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. Valhi is clearly the better dividend stock, given its higher yield and lower payout ratio.

Analyst Ratings

This is a summary of current ratings and price targets for Valhi and Resonac, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Valhi	1	0	0	0	1.00
Resonac	0	0	0	2	4.00

Earnings & Valuation

This table compares Valhi and Resonac”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Valhi	$2.08 billion	0.19	-$57.60 million	($2.54)	-5.40
Resonac	$9.01 billion	1.74	$194.51 million	$1.23	69.09

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

Summary

Resonac beats Valhi on 10 of the 15 factors compared between the two stocks.

About Valhi

Valhi, Inc. engages in the chemicals, component products, and real estate management and development businesses in Europe, North America, the Asia Pacific, and internationally. The company’s Chemicals segment produces and markets titanium dioxide pigments (TiO2), which are white inorganic pigments used in various applications by paint, plastics, decorative laminate, and paper manufacturers. It offers TiO2 under the KRONOS name through agents and distributors. The company’s Component Products segment manufactures mechanical and electrical cabinet locks, and other locking mechanisms for use in ignition systems, mailboxes, file cabinets, desk drawers, tool storage cabinets, vending and cash containment machines, integrated inventory and access control secured narcotics boxes, medical cabinetry security, electronic circuit panels, storage compartments, and gas station security applications. It also provides stainless steel exhaust components, gauges, throttle controls, wake enhancement systems, trim tabs, and related hardware and accessories primarily for performance and ski/wakeboard boats. The company’s Real Estate Management and Development segment offers utility services to industrial and municipal customers; owns real properties; and develops land holdings for commercial, industrial, and residential purposes. It also holds marketable securities and other investments. The company was incorporated in 1932 and is based in Dallas, Texas. Valhi, Inc. is a subsidiary of Dixie Rice Agricultural L.L.C.

About Resonac

Resonac Holdings Corporation operates as a chemical company in Japan, China, rest of Asia, and internationally. It operates through Semiconductor and Electronic Materials, Mobility, Innovation Enabling Materials, and Chemicals segments. The company offers gases and solvents, abatement systems and surface treatments, CMP slurries, and anti-charging materials; semiconductor-related materials, display and sensor-related materials, and films; base and photosensitive materials for PWBs; hard disks, SiCs, and optical semiconductors for use as electronic device components; and molded plastics/sheet-formed, powder metal, and aluminum products for automotives. It also provides lithium-ion batteries and mechanical carbon; ceramics, resins, cosmetic ingredients/medicinal additives, monomers, adhesives, tapes, and chromatography products; and elastomers. In addition, the company offers polyimides; HD media; friction materials; aluminum gravity casting products; packaging/containers for food, medicine, and electronics; electrical insulating epoxy resin molded products; zipper bags and tapes; titanium oxide and alumina; and elastic polishing grindstone. Further, it provides polypropylene and polyethylene; liquefied carbon dioxide, dry ice, and gas-related equipment; liquefied oxygen, nitrogen, and argon; molecular sieve; graphite electrodes; plasters, fireproofing pipes, and wall sidings; cement and moisture removal sheets; industrial materials; and FRP, coated sand, and separating mediums. Additionally, the company engages in the contract development and manufacturing of regenerative medicines; leasing of personal computers and other business equipment; outsourcing of salary, welfare, and finance-related business; and synthesis, analysis, and SDS preparation services. The company was formerly known as Showa Denko K.K. and changed its name to Resonac Holdings Corporation in January 2023. Resonac Holdings Corporation was incorporated in 1939 and is headquartered in Tokyo, Japan.