Comparing Valhi (NYSE:VHI) and Methanex (NASDAQ:MEOH)

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

Risk & Volatility

Valhi has a beta of 1.18, meaning that its stock price is 18% more volatile than the S&P 500. Comparatively, Methanex has a beta of 0.73, meaning that its stock price is 27% less volatile than the S&P 500.

Institutional & Insider Ownership

3.8% of Valhi shares are owned by institutional investors. Comparatively, 73.5% of Methanex shares are owned by institutional investors. 0.1% of Valhi shares are owned by insiders. Comparatively, 1.0% of Methanex shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers 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 2.6%. Methanex pays an annual dividend of $0.74 per share and has a dividend yield of 1.8%. Valhi pays out 50.0% of its earnings in the form of a dividend. Methanex pays out 25.1% 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. Methanex has increased its dividend for 4 consecutive years.

Analyst Ratings

This is a breakdown of current ratings and price targets for Valhi and Methanex, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Valhi	2	0	0	0	1.00
Methanex	0	3	9	1	2.85

Valhi presently has a consensus price target of $12.00, suggesting a potential downside of 1.64%. Methanex has a consensus price target of $46.55, suggesting a potential upside of 14.25%. Given Methanex’s stronger consensus rating and higher possible upside, analysts clearly believe Methanex is more favorable than Valhi.

Valuation & Earnings

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

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Valhi	$2.10 billion	0.16	$108.00 million	$0.64	19.06
Methanex	$3.72 billion	0.85	$163.99 million	$2.95	13.81

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

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Valhi	0.89%	2.22%	1.13%
Methanex	5.97%	9.07%	3.41%

Summary

Methanex beats Valhi on 15 of the 18 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 Methanex

Methanex Corporation produces and supplies methanol in China, Europe, the United States, South America, South Korea, Canada, and Asia. The company also purchases methanol produced by others under methanol offtake contracts and on the spot market. In addition, it owns and leases storage and terminal facilities. The company owns and manages a fleet of approximately 30 ocean-going vessels. It serves chemical and petrochemical producers. Methanex Corporation was incorporated in 1968 and is headquartered in Vancouver, Canada.