Analyzing PPG Industries (NYSE:PPG) and Toray Industries (OTCMKTS:TRYIY)

PPG Industries (NYSE:PPG) and Toray Industries (OTCMKTS:TRYIY) are both large-cap basic materials companies, but which is the better investment? We will compare the two businesses based on the strength of their earnings, risk, profitability, dividends, analyst recommendations, valuation and institutional ownership.

Volatility and Risk

PPG Industries has a beta of 1.16, suggesting that its stock price is 16% more volatile than the S&P 500. Comparatively, Toray Industries has a beta of 0.43, suggesting that its stock price is 57% less volatile than the S&P 500.

Dividends

PPG Industries pays an annual dividend of $2.84 per share and has a dividend yield of 2.2%. Toray Industries pays an annual dividend of $0.15 per share and has a dividend yield of 0.9%. PPG Industries pays out 40.9% of its earnings in the form of a dividend. Toray Industries pays out 38.5% 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. PPG Industries has increased its dividend for 54 consecutive years. PPG Industries is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Recommendations

This is a summary of recent ratings and price targets for PPG Industries and Toray Industries, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
PPG Industries	0	11	7	1	2.47
Toray Industries	0	2	0	0	2.00

PPG Industries presently has a consensus target price of $124.79, indicating a potential downside of 3.34%. Given PPG Industries’ stronger consensus rating and higher possible upside, research analysts clearly believe PPG Industries is more favorable than Toray Industries.

Earnings and Valuation

This table compares PPG Industries and Toray Industries”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
PPG Industries	$15.88 billion	1.82	$1.58 billion	$6.94	18.60
Toray Industries	$16.83 billion	0.74	$514.21 million	$0.39	42.56

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

Profitability

This table compares PPG Industries and Toray Industries’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
PPG Industries	9.93%	22.67%	7.90%
Toray Industries	1.71%	2.38%	1.30%

Insider & Institutional Ownership

81.9% of PPG Industries shares are held by institutional investors. 0.3% of PPG Industries shares are held 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.

Summary

PPG Industries beats Toray Industries on 15 of the 18 factors compared between the two stocks.

About PPG Industries

PPG Industries, Inc. manufactures and distributes paints, coatings, and specialty materials in the United States, Canada, the Asia Pacific, Latin America, Europe, the Middle East, and Africa. It operates through two segments, Performance Coatings and Industrial Coatings. The Performance Coatings segment offers coatings, solvents, adhesives, sealants, sundries, and software for automotive and commercial transport/fleet repair and refurbishing, light industrial coatings, and specialty coatings for signs; wood stains; paints, thermoplastics, pavement marking products, and other advanced technologies for pavement marking for government, commercial infrastructure, painting, and maintenance contractors; and coatings, sealants, transparencies, transparent armor, adhesives, engineered materials, and packaging and chemical management services for commercial, military, regional jet, and general aviation aircraft. The Industrial Coatings segment offers coatings, adhesives and sealants, and metal pretreatments, as well as services and coatings applications for appliances, agricultural and construction equipment, consumer electronics, automotive parts and accessories, building products, kitchenware, and transportation vehicles and other finished products; and on-site coatings services. It also provides coatings for metal cans, closures, plastic and aluminum tubes for food, beverage and personal care, promotional, and specialty packaging; amorphous precipitated silica for tire, battery separator, and other end-uses; TESLIN substrates for labels, e-passports, drivers' licenses, breathable membranes, and loyalty and identification cards; and organic light emitting diode materials, displays and lighting lens materials, optical lenses, color-change products, and photochromic dyes. PPG Industries, Inc. was incorporated in 1883 and is headquartered in Pittsburgh, Pennsylvania.

About Toray Industries

Toray Industries, Inc., together with its subsidiaries, manufactures, processes, and sells fibers and textiles, performance chemicals, carbon fiber composite materials, environment and engineering products, and life science products in Japan, China, North America, Europe, and internationally. The company offers filament yarns, staple fibers, and spun yarns, as well as woven and knitted fabrics of nylon, polyester, acrylics, and others; non-woven fabrics; ultra-fine fibers; and apparel products. It also provides nylon, ABS, PBT, PPS, and other resins and molded products; polyolefin foam products; polyester, polyethylene, polypropylene, and other films; processed film products; raw materials for synthetic fibers and other plastics; fine chemicals; electronic and information materials; and graphic materials. In addition, the company offers carbon fibers, carbon fiber composite materials, and molded products; analysis, physical evaluation, research, and other services; and pharmaceuticals, medical devices, etc. Further, it provides engineering services; condominiums; industrial equipment and machinery; IT-related equipment; water treatment membranes and related equipment; and materials for housing, building, and civil engineering applications. The company was formerly known as Toyo Rayon Co., Ltd. and changed its name to Toray Industries, Inc. in 1970. The company was incorporated in 1926 and is headquartered in Tokyo, Japan.