Head to Head Survey: Ternium (TX) and Steel Dynamics (STLD)

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Ternium (NASDAQ: STLD) and Steel Dynamics (NASDAQ:STLD) are both basic materials companies, but which is the superior investment? We will compare the two businesses based on the strength of their institutional ownership, valuation, risk, earnings, dividends, profitability and analyst recommendations.

Analyst Recommendations

This is a breakdown of recent recommendations and price targets for Ternium and Steel Dynamics, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Ternium 1 0 4 0 2.60
Steel Dynamics 0 2 11 0 2.85

Ternium presently has a consensus price target of $39.50, indicating a potential upside of 49.06%. Steel Dynamics has a consensus price target of $52.75, indicating a potential upside of 12.71%. Given Ternium’s higher possible upside, equities research analysts plainly believe Ternium is more favorable than Steel Dynamics.

Profitability

This table compares Ternium and Steel Dynamics’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Ternium 9.42% 17.93% 8.94%
Steel Dynamics 10.01% 26.90% 12.40%

Valuation and Earnings

This table compares Ternium and Steel Dynamics’ gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Ternium $9.70 billion 0.55 $886.21 million $4.51 5.88
Steel Dynamics $9.54 billion 1.15 $812.74 million $2.65 17.66

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

Dividends

Ternium pays an annual dividend of $1.10 per share and has a dividend yield of 4.2%. Steel Dynamics pays an annual dividend of $0.75 per share and has a dividend yield of 1.6%. Ternium pays out 24.4% of its earnings in the form of a dividend. Steel Dynamics pays out 28.3% 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. Steel Dynamics has increased its dividend for 5 consecutive years. Ternium is clearly the better dividend stock, given its higher yield and lower payout ratio.

Institutional and Insider Ownership

17.8% of Ternium shares are owned by institutional investors. Comparatively, 83.6% of Steel Dynamics shares are owned by institutional investors. 0.0% of Ternium shares are owned by company insiders. Comparatively, 4.4% of Steel Dynamics shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Volatility and Risk

Ternium has a beta of 1.12, indicating that its stock price is 12% more volatile than the S&P 500. Comparatively, Steel Dynamics has a beta of 1.31, indicating that its stock price is 31% more volatile than the S&P 500.

Summary

Steel Dynamics beats Ternium on 11 of the 17 factors compared between the two stocks.

Ternium Company Profile

Ternium S.A., through its subsidiaries, manufactures and processes various steel products in Mexico, Argentina, Paraguay, Chile, Bolivia, Uruguay, Brazil, the United States, Colombia, Guatemala, Costa Rica, Honduras, El Salvador, and Nicaragua. It operates in two segments, Steel and Mining. The Steel segment offers steel products, including slabs, billets and round bars, hot-rolled coils and sheets, bars and stirrups, wire rods, cold-rolled coils and sheets, tin plates, hot dipped galvanized and electrogalvanized sheets and pre-painted sheets, steel pipes and tubular products, beams, and roll formed products, as well as other products, such as pig iron. It also produces and sells electricity to electric grids. The Mining segment sells iron ore concentrates and pellets. The company serves various companies and small businesses operating in the automotive, home appliance, construction, capital goods, container, food, and energy industries. Ternium S.A. was founded in 1961 and is based in Luxembourg City, Luxembourg. Ternium S.A. is a subsidiary of Techint Holdings S.à r.l.

Steel Dynamics Company Profile

Steel Dynamics, Inc., together with its subsidiaries, engages in the steel products manufacturing and metals recycling businesses in the United States and internationally. The company operates through three segments: Steel Operations, Metals Recycling Operations, and Steel Fabrication Operations. The Steel Operations segment provides hot roll, cold roll, and coated steel products; structural steel beams, pilings, and standard and premium grade rail products; engineered special-bar-quality products; merchant bar products, including angles, merchant rounds, flats, channels, and reinforcing bars; beams, channels, and specialty steel sections; and threaded rod products, and cold drawn and heat treated bars. Its products are used in construction, automotive, manufacturing, transportation, heavy and agriculture equipment, and pipe and tube industry sectors. This segment sells its products directly to end-users, steel fabricators, and service centers. The Metals Recycling Operations segment is involved in the purchase, process, and resale of ferrous and nonferrous scrap metals into reusable forms and grades. Its ferrous products include heavy melting steel, busheling, bundled scrap, shredded scrap, steel turnings, and cast iron products; and nonferrous products comprise aluminum, brass, copper, stainless steel, and other nonferrous metals. This segment also provides transportation logistics, scrap management, marketing, and brokerage services. The Steel Fabrication Operations segment produces steel building components comprising steel joists, girders, trusses, and steel deck products for non-residential steel fabricators. Steel Dynamics, Inc. was founded in 1993 and is headquartered in Fort Wayne, Indiana.

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