Critical Review: Nippon Steel & Sumitomo Metal (OTCMKTS:NPSCY) vs. Ternium (NYSE:TX)

Nippon Steel & Sumitomo Metal (OTCMKTS:NPSCY) and Ternium (NYSE:TX) are both basic materials companies, but which is the better investment? We will contrast the two companies based on the strength of their institutional ownership, risk, profitability, earnings, dividends, analyst recommendations and valuation.

Profitability

This table compares Nippon Steel & Sumitomo Metal and Ternium’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Nippon Steel & Sumitomo Metal	-0.42%	-0.61%	-0.30%
Ternium	3.72%	1.89%	1.31%

Insider & Institutional Ownership

12.0% of Ternium shares are owned by institutional investors. 0.0% of Ternium shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock is poised for long-term growth.

Dividends

Nippon Steel & Sumitomo Metal pays an annual dividend of $0.07 per share and has a dividend yield of 1.7%. Ternium pays an annual dividend of $1.80 per share and has a dividend yield of 4.7%. Nippon Steel & Sumitomo Metal pays out -350.0% of its earnings in the form of a dividend. Ternium pays out 60.6% 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.

Earnings and Valuation

This table compares Nippon Steel & Sumitomo Metal and Ternium”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Nippon Steel & Sumitomo Metal	$57.10 billion	0.38	$2.31 billion	($0.02)	-202.50
Ternium	$17.65 billion	0.44	-$53.67 million	$2.97	12.93

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

Risk & Volatility

Nippon Steel & Sumitomo Metal has a beta of 0.75, meaning that its share price is 25% less volatile than the S&P 500. Comparatively, Ternium has a beta of 1.36, meaning that its share price is 36% more volatile than the S&P 500.

Analyst Ratings

This is a breakdown of current ratings for Nippon Steel & Sumitomo Metal and Ternium, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Nippon Steel & Sumitomo Metal	0	0	0	0	0.00
Ternium	2	4	4	1	2.36

Ternium has a consensus price target of $34.69, suggesting a potential downside of 9.67%. Given Ternium’s stronger consensus rating and higher possible upside, analysts clearly believe Ternium is more favorable than Nippon Steel & Sumitomo Metal.

Summary

Ternium beats Nippon Steel & Sumitomo Metal on 14 of the 17 factors compared between the two stocks.

About Nippon Steel & Sumitomo Metal

Nippon Steel Corporation engages in steelmaking and steel fabrication, engineering and construction, chemicals and materials, and system solutions businesses in Japan and internationally. The company offers steel plates, sheets, and slags; bar and rod materials; structural steel; pipes and tubes; titanium and stainless products; and railway, automotive, and machinery parts for applications in automotive, energy, infrastructure, and consumer electronics markets. It is also involved in construction; waste processing and recycling; supplying electricity, gas, and heat; and the provision of coal-based chemical products, petrochemicals, electronic materials, materials and components for semiconductors and electronic parts, carbon fiber, and composite products. In addition, the company offers computer systems engineering and consulting, IT-enabled outsourcing, and other services. The company was formerly known as Nippon Steel & Sumitomo Metal Corporation and changed its name to Nippon Steel Corporation in April 2019. The company was incorporated in 1950 and is headquartered in Tokyo, Japan.

About Ternium

Ternium S.A., together with its subsidiaries, manufactures and distributes steel products in Mexico, Southern Region, Brazil, and internationally. It operates through three segments: Steel, Mining, and Usiminas. The Steel segment offers slabs, hot and cold rolled products, coated products, roll formed and tubular products, bars, billets, and other products. Its Mining segment sells iron ore and pellets. The Usiminas segment offers iron ore extraction, steel transformation, and production of capital goods and logistics; and manufactures and sells various products and raw materials, such as flat steel, iron ore, and stamped steel parts for the automotive industry and products for the civil construction and capital goods industry. It also provides medical and social; scrap; renewable energy; and engineering and other services, as well as operates as a distribution company. In addition, the company engages in the exploration, exploitation, and pelletizing of iron ore. 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.