Critical Survey: HudBay Minerals (NYSE:HBM) and Cleveland-Cliffs (NYSE:CLF)

Cleveland-Cliffs (NYSE:CLF) and HudBay Minerals (NYSE:HBM) are both mid-cap materials companies, but which is the better business? We will contrast the two companies based on the strength of their institutional ownership, earnings, valuation, profitability, dividends, risk and analyst recommendations.

Analyst Ratings

This is a breakdown of recent recommendations and price targets for Cleveland-Cliffs and HudBay Minerals, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Cleveland-Cliffs	2	7	3	0	2.08
HudBay Minerals	0	2	10	0	2.83

Cleveland-Cliffs presently has a consensus price target of $14.18, indicating a potential upside of 23.55%. HudBay Minerals has a consensus price target of $31.33, indicating a potential upside of 50.16%. Given HudBay Minerals’ stronger consensus rating and higher possible upside, analysts clearly believe HudBay Minerals is more favorable than Cleveland-Cliffs.

Insider & Institutional Ownership

67.7% of Cleveland-Cliffs shares are held by institutional investors. Comparatively, 57.8% of HudBay Minerals shares are held by institutional investors. 0.9% of Cleveland-Cliffs shares are held by insiders. Comparatively, 0.3% of HudBay Minerals shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Earnings & Valuation

This table compares Cleveland-Cliffs and HudBay Minerals”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Cleveland-Cliffs	$20.07 billion	0.33	-$1.48 billion	($0.85)	-13.50
HudBay Minerals	$2.21 billion	4.19	$568.50 million	$1.70	12.27

HudBay Minerals has lower revenue, but higher earnings than Cleveland-Cliffs. Cleveland-Cliffs is trading at a lower price-to-earnings ratio than HudBay Minerals, indicating that it is currently the more affordable of the two stocks.

Volatility & Risk

Cleveland-Cliffs has a beta of 1.99, suggesting that its share price is 99% more volatile than the S&P 500. Comparatively, HudBay Minerals has a beta of 1.62, suggesting that its share price is 62% more volatile than the S&P 500.

Dividends

Cleveland-Cliffs pays an annual dividend of $0.24 per share and has a dividend yield of 2.1%. HudBay Minerals pays an annual dividend of $0.03 per share and has a dividend yield of 0.1%. Cleveland-Cliffs pays out -28.2% of its earnings in the form of a dividend. HudBay Minerals pays out 1.8% 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. Cleveland-Cliffs is clearly the better dividend stock, given its higher yield and lower payout ratio.

Profitability

This table compares Cleveland-Cliffs and HudBay Minerals’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Cleveland-Cliffs	-2.36%	-6.83%	-2.05%
HudBay Minerals	27.48%	9.47%	5.44%

Summary

HudBay Minerals beats Cleveland-Cliffs on 10 of the 16 factors compared between the two stocks.

About Cleveland-Cliffs

Cleveland-Cliffs is the largest flat-rolled steel company and the largest iron ore pellet producer in North America. The company is vertically integrated from mining through iron making, steelmaking, rolling, finishing and downstream with hot and cold stamping of steel parts and components. The company was formerly known as Cliffs Natural Resources Inc. and changed its name to Cleveland-Cliffs Inc. in August 2017. Cleveland-Cliffs Inc. was founded in 1847 and is headquartered in Cleveland, Ohio.

About HudBay Minerals

Hudbay Minerals Inc., a diversified mining company, focuses on the exploration, development, operation, and optimization of properties in North and South America. It produces copper concentrates containing gold, silver, and molybdenum; gold concentrates containing zinc; zinc concentrates; molybdenum concentrates; and silver/gold doré. The company's flagship project is the 100% owned Constancia mine located in the Province of Chumbivilcas in southern Peru. Hudbay Minerals Inc. was founded in 1927 and is based in Toronto, Canada.