L.B. Foster (NASDAQ: FSTR) and Olympic Steel (NASDAQ:ZEUS) are both small-cap basic materials companies, but which is the better stock? We will compare the two companies based on the strength of their institutional ownership, dividends, earnings, profitabiliy, analyst recommendations, valuation and risk.

Earnings and Valuation

This table compares L.B. Foster and Olympic Steel’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
L.B. Foster $475.91 million 0.42 $20.86 million ($4.49) -4.28
Olympic Steel $1.13 billion 0.18 $35.05 million $0.75 24.13

Olympic Steel has higher revenue and earnings than L.B. Foster. L.B. Foster is trading at a lower price-to-earnings ratio than Olympic Steel, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a summary of current ratings and recommmendations for L.B. Foster and Olympic Steel, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
L.B. Foster 0 0 0 0 N/A
Olympic Steel 0 1 2 0 2.67

Olympic Steel has a consensus price target of $22.33, indicating a potential upside of 23.39%. Given Olympic Steel’s higher probable upside, analysts clearly believe Olympic Steel is more favorable than L.B. Foster.

Volatility & Risk

L.B. Foster has a beta of 2.24, indicating that its stock price is 124% more volatile than the S&P 500. Comparatively, Olympic Steel has a beta of 1.73, indicating that its stock price is 73% more volatile than the S&P 500.

Profitability

This table compares L.B. Foster and Olympic Steel’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
L.B. Foster -9.83% -27.36% -10.02%
Olympic Steel 0.71% 2.82% 1.26%

Institutional & Insider Ownership

65.2% of L.B. Foster shares are owned by institutional investors. Comparatively, 69.7% of Olympic Steel shares are owned by institutional investors. 15.2% of L.B. Foster shares are owned by insiders. Comparatively, 18.3% of Olympic Steel shares are owned by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company will outperform the market over the long term.

Dividends

L.B. Foster pays an annual dividend of $0.04 per share and has a dividend yield of 0.2%. Olympic Steel pays an annual dividend of $0.08 per share and has a dividend yield of 0.4%. L.B. Foster pays out -0.9% of its earnings in the form of a dividend. Olympic Steel pays out 10.7% 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.

Summary

Olympic Steel beats L.B. Foster on 11 of the 14 factors compared between the two stocks.

About L.B. Foster

L.B. Foster Company is a manufacturer, fabricator and distributor of products and services for the rail, construction, energy and utility markets. The Company’s segments include Rail Products and Services, Construction Products, and Tubular and Energy Services. Its Rail Products segment provides a range of new and used rail, trackwork and accessories to railroads, mines and industry. The Rail segment designs and produces concrete railroad ties, insulated rail joints, power rail, track fasteners, coverboards and special accessories for mass transit and other rail systems. The Construction Products segment sells and rents steel sheet piling, H-bearing pile and other piling products for foundation and earth retention requirements. The Tubular and Energy Services segment supplies pipe coatings for natural gas pipelines and utilities, blending, injection and metering equipment for the oil and gas market, and produces threaded pipe products for industrial water well and irrigation markets.

About Olympic Steel

Olympic Steel, Inc. is a metals service center. The Company provides metals processing and distribution services for a range of customers. The Company operates through three segments: carbon flat products, specialty metals flat products, and tubular and pipe products. The Company’s carbon flat products segment’s focus is on the direct sale and distribution of large volumes of processed carbon and coated flat-rolled sheet, coil and plate products and fabricated parts. The Company’s specialty metals flat products segment’s focus is on the direct sale and distribution of processed aluminum and stainless flat-rolled sheet and coil products, flat bar products and fabricated parts. The Company’s tubular and pipe products segment consists of the Chicago Tube and Iron Company (CTI) business. Through its tubular and pipe products segment, it distributes metals tubing, pipe, bar, valve and fittings, and fabricate pressure parts supplied to various industrial markets.

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