Head-To-Head Review: Commercial Metals (NYSE:CMC) vs. Franco-Nevada (NYSE:FNV)

Commercial Metals (NYSE:CMC) and Franco-Nevada (NYSE:FNV) are both materials companies, but which is the superior business? We will contrast the two companies based on the strength of their dividends, earnings, valuation, risk, analyst recommendations, profitability and institutional ownership.

Profitability

This table compares Commercial Metals and Franco-Nevada’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Commercial Metals	6.98%	17.00%	7.85%
Franco-Nevada	63.79%	18.58%	17.19%

Insider & Institutional Ownership

86.9% of Commercial Metals shares are held by institutional investors. Comparatively, 77.1% of Franco-Nevada shares are held by institutional investors. 0.6% of Commercial Metals shares are held by insiders. Comparatively, 0.7% of Franco-Nevada shares are held by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.

Volatility and Risk

Commercial Metals has a beta of 1.55, indicating that its share price is 55% more volatile than the S&P 500. Comparatively, Franco-Nevada has a beta of 0.34, indicating that its share price is 66% less volatile than the S&P 500.

Analyst Ratings

This is a summary of current ratings and price targets for Commercial Metals and Franco-Nevada, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Commercial Metals	1	4	10	0	2.60
Franco-Nevada	0	4	10	0	2.71

Commercial Metals currently has a consensus target price of $78.73, indicating a potential upside of 22.70%. Franco-Nevada has a consensus target price of $275.30, indicating a potential upside of 8.35%. Given Commercial Metals’ higher probable upside, equities analysts plainly believe Commercial Metals is more favorable than Franco-Nevada.

Dividends

Commercial Metals pays an annual dividend of $0.80 per share and has a dividend yield of 1.2%. Franco-Nevada pays an annual dividend of $1.76 per share and has a dividend yield of 0.7%. Commercial Metals pays out 13.6% of its earnings in the form of a dividend. Franco-Nevada pays out 23.0% 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. Commercial Metals has increased its dividend for 4 consecutive years and Franco-Nevada has increased its dividend for 18 consecutive years. Commercial Metals is clearly the better dividend stock, given its higher yield and lower payout ratio.

Valuation and Earnings

This table compares Commercial Metals and Franco-Nevada”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Commercial Metals	$9.39 billion	0.75	$655.85 million	$5.87	10.93
Franco-Nevada	$1.82 billion	26.89	$1.11 billion	$7.65	33.21

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

Summary

Franco-Nevada beats Commercial Metals on 10 of the 16 factors compared between the two stocks.

About Commercial Metals

Commercial Metals Company (CMC) is a metals recycling, manufacturing and construction-services company. Its operations span the collection and processing of ferrous and nonferrous scrap, which can be used as raw material for steelmaking, and the production of steel and other metal products. CMC manufactures products including reinforcing bar, merchant bar, wire rod and other steel products used in construction and industrial applications. The company also provides construction-related products and services, including steel fabrication and engineered solutions for infrastructure projects.

About Franco-Nevada

Franco-Nevada is a Toronto-based company that provides financing to mining and energy businesses in exchange for royalties, streams and other interests in production. Rather than operating mines itself, it gives partners capital and receives a share of revenue or future output from their projects. The company’s portfolio is focused on gold and other precious metals, and also includes interests in other minerals and energy assets, including oil and gas. Its projects and counterparties span multiple regions, including North and South America, Africa, Australia and Europe.