Cliffs Natural Resources (NYSE: CLF) and Olympic Steel (NASDAQ:ZEUS) are both basic materials companies, but which is the better business? We will contrast the two businesses based on the strength of their profitability, earnings, risk, dividends, analyst recommendations, institutional ownership and valuation.

Profitability

This table compares Cliffs Natural Resources and Olympic Steel’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Cliffs Natural Resources 2.44% -13.83% 7.41%
Olympic Steel 0.71% 2.82% 1.26%

Earnings & Valuation

This table compares Cliffs Natural Resources and Olympic Steel’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Cliffs Natural Resources $2.34 billion 0.91 $480.50 million $0.22 32.68
Olympic Steel $1.21 billion 0.16 $36.12 million $0.75 22.84

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

Insider and Institutional Ownership

66.6% of Cliffs Natural Resources shares are owned by institutional investors. Comparatively, 69.7% of Olympic Steel shares are owned by institutional investors. 0.5% of Cliffs Natural Resources shares are owned by company insiders. Comparatively, 18.3% of Olympic Steel shares are owned by company 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.

Volatility and Risk

Cliffs Natural Resources has a beta of 1.69, suggesting that its stock price is 69% more volatile than the S&P 500. Comparatively, Olympic Steel has a beta of 1.73, suggesting that its stock price is 73% more volatile than the S&P 500.

Dividends

Olympic Steel pays an annual dividend of $0.08 per share and has a dividend yield of 0.5%. Cliffs Natural Resources does not pay a dividend. Olympic Steel pays out 10.7% of its earnings in the form of a dividend.

Analyst Recommendations

This is a summary of recent ratings and recommmendations for Cliffs Natural Resources and Olympic Steel, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Cliffs Natural Resources 3 2 4 0 2.11
Olympic Steel 0 1 2 0 2.67

Cliffs Natural Resources presently has a consensus target price of $8.29, suggesting a potential upside of 15.24%. Olympic Steel has a consensus target price of $22.33, suggesting a potential upside of 30.38%. Given Olympic Steel’s stronger consensus rating and higher possible upside, analysts plainly believe Olympic Steel is more favorable than Cliffs Natural Resources.

Summary

Olympic Steel beats Cliffs Natural Resources on 9 of the 16 factors compared between the two stocks.

About Cliffs Natural Resources

Cliffs Natural Resources Inc. is a mining and natural resources company. The Company is a supplier of iron ore pellets to the North American steel industry from its mines and pellet plants located in Michigan and Minnesota. The Company’s segments include U.S. Iron Ore and Asia Pacific Iron Ore. The Company is a producer of iron ore pellets, primarily selling production from U.S. Iron Ore to integrated steel companies in the United States, Canada and Mexico. Its Asia Pacific Iron Ore operations are located in Western Australia and consist of its Koolyanobbing operation. The Koolyanobbing operations serve the Asian iron ore markets with direct-shipped fines and lump ore. In addition, the Company operates an iron ore mining complex in Western Australia. In the United States, the Company owned four operational iron ore mines and one indefinitely idled mine, as of December 31, 2016. As of December 31, 2016, it operated four iron ore mines located in Michigan and Minnesota.

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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