Critical Contrast: Quanex (NX) versus Arconic (ARNC)

Quanex (NYSE: NX) and Arconic (NYSE:ARNC) are both construction companies, but which is the better stock? We will contrast the two companies based on the strength of their earnings, institutional ownership, valuation, risk, dividends, profitability and analyst recommendations.

Profitability

This table compares Quanex and Arconic’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Quanex 3.17% 6.72% 3.45%
Arconic -1.91% 11.40% 3.28%

Earnings & Valuation

This table compares Quanex and Arconic’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Quanex $866.55 million 0.72 $18.68 million $0.77 23.18
Arconic $12.96 billion 0.67 -$74.00 million $1.22 14.82

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

Institutional & Insider Ownership

98.7% of Quanex shares are held by institutional investors. Comparatively, 82.8% of Arconic shares are held by institutional investors. 5.3% of Quanex shares are held by company insiders. Comparatively, 0.2% of Arconic shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Dividends

Quanex pays an annual dividend of $0.16 per share and has a dividend yield of 0.9%. Arconic pays an annual dividend of $0.24 per share and has a dividend yield of 1.3%. Quanex pays out 20.8% of its earnings in the form of a dividend. Arconic pays out 19.7% 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. Arconic is clearly the better dividend stock, given its higher yield and lower payout ratio.

Analyst Recommendations

This is a summary of recent ratings and recommmendations for Quanex and Arconic, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Quanex 0 2 1 0 2.33
Arconic 0 4 6 0 2.60

Quanex currently has a consensus target price of $25.00, indicating a potential upside of 40.06%. Arconic has a consensus target price of $26.90, indicating a potential upside of 48.78%. Given Arconic’s stronger consensus rating and higher probable upside, analysts clearly believe Arconic is more favorable than Quanex.

Volatility and Risk

Quanex has a beta of 0.81, suggesting that its share price is 19% less volatile than the S&P 500. Comparatively, Arconic has a beta of 1.17, suggesting that its share price is 17% more volatile than the S&P 500.

Summary

Arconic beats Quanex on 9 of the 16 factors compared between the two stocks.

About Quanex

Quanex Building Products Corporation, together with its subsidiaries, provides components for the fenestration industry worldwide. It operates through three segments: North American Engineered Components, European Engineered Components, and North American Cabinet Components. The company offers flexible insulating glass spacers; extruded vinyl profiles; window and door screens; cabinet doors and other components for original equipment manufacturers (OEMs) in the kitchen and bathroom cabinet industry; and precision-formed metal and wood products, as well as solar panel sealants, trim moldings, vinyl decking and fencing products, water retention barriers, and conservatory roof components. It sells its products to OEMs in the building products industry through sales representatives, direct sales force, distributors, and independent sales agents. The company is headquartered in Houston, Texas.

About Arconic

Arconic Inc. engineers, manufactures, and sells lightweight metals of aluminum, titanium, and nickel worldwide. It operates through three segments: Engineered Products and Solutions, Global Rolled Products, and Transportation and Construction Solutions. The Engineered Products and Solutions produces and sells fastening systems and seamless rolled rings; investment castings, including airfoils and forged jet engine components; and extruded, machined, and formed aircraft parts, as well as various forged, extruded, and machined metal products. This segment serves commercial and defense aerospace, commercial transportation, and power generation end markets. The Global Rolled Products segment produces and sells aluminum sheets and plates; and aseptic foils. This segment serves commercial and defense aerospace, commercial transportation, and power generation end markets. The Transportation and Construction Solutions segment produces and sells integrated aluminum structural systems, architectural extrusions, and forged aluminum commercial vehicle wheels, as well as aluminum products for the industrial products end market. This segment serves nonresidential building and construction, and commercial transportation end markets. The company sells its products directly to customers and through distributors. Arconic Inc. was founded in 2016 and is based in New York, New York.

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