Kraton Corporation (NYSE: KRA) and Stepan (NYSE:SCL) are both small-cap basic materials companies, but which is the better business? We will contrast the two businesses based on the strength of their profitabiliy, risk, dividends, earnings, institutional ownership, analyst recommendations and valuation.

Dividends

Stepan pays an annual dividend of $0.82 per share and has a dividend yield of 1.0%. Kraton Corporation does not pay a dividend. Stepan pays out 21.5% of its earnings in the form of a dividend. Kraton Corporation has raised its dividend for 49 consecutive years.

Risk & Volatility

Kraton Corporation has a beta of 1.23, suggesting that its stock price is 23% more volatile than the S&P 500. Comparatively, Stepan has a beta of 1.26, suggesting that its stock price is 26% more volatile than the S&P 500.

Insider and Institutional Ownership

97.5% of Kraton Corporation shares are owned by institutional investors. Comparatively, 62.0% of Stepan shares are owned by institutional investors. 5.0% of Kraton Corporation shares are owned by company insiders. Comparatively, 13.1% of Stepan shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Analyst Ratings

This is a summary of current recommendations and price targets for Kraton Corporation and Stepan, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Kraton Corporation 0 0 0 0 N/A
Stepan 0 3 1 1 2.60

Stepan has a consensus target price of $44.20, suggesting a potential downside of 44.58%. Given Stepan’s higher possible upside, analysts plainly believe Stepan is more favorable than Kraton Corporation.

Profitability

This table compares Kraton Corporation and Stepan’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Kraton Corporation 2.36% 9.52% 1.69%
Stepan 4.85% 14.95% 7.28%

Valuation and Earnings

This table compares Kraton Corporation and Stepan’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Kraton Corporation $1.85 billion 0.59 $338.62 million $1.38 25.49
Stepan $1.83 billion 0.98 $207.56 million $3.81 20.93

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

Summary

Stepan beats Kraton Corporation on 11 of the 17 factors compared between the two stocks.

Kraton Corporation Company Profile

Kraton Corporation, formerly Kraton Performance Polymers, Inc., is a specialty chemicals company. The Company manufactures styrenic block copolymers (SBCs) and other engineered polymers. The Company also produces specialty products primarily derived from pine wood pulping co-products. The Company operates through two segments: Polymer Segment, which comprises SBCs and other engineered polymers business, and Chemical Segment, which comprises pine-based specialty products business. Its SBCs are used in a range of applications, including adhesives, coatings, consumer and personal care products, sealants, lubricants, medical, packaging, automotive, paving, roofing and footwear products. The Company also sells isoprene rubber (IR) and isoprene rubber latex (IRL), which are non-SBC products primarily used in applications, such as medical products, personal care, adhesives, tackifiers, paints and coatings. It offers crude tall oil (CTO) and crude sulfate turpentine (CST).

Stepan Company Profile

Stepan Company produces specialty and intermediate chemicals, which are sold to other manufacturers and used in a range of end products. The Company operates through three segments: Surfactants, Polymers and Specialty Products. The Company’s principal markets include manufacturers of cleaning and washing compounds (including detergents, shampoos, fabric softeners, toothpastes and household cleaners), paints, cosmetics, food, beverages, nutritional supplements, agricultural products and plastics. Its Surfactants segment offers products, which are principal ingredients in consumer and industrial cleaning products, such as detergents for washing clothes, dishes, carpets, floors and walls, as well as shampoos and body washes. Its Polymers segment includes polyurethane polyols, polyester resins and phthalic anhydride. Its Specialty Products segment includes flavors, emulsifiers and solubilizers used in food, flavoring, nutritional supplement and pharmaceutical applications.

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