Steel Dynamics (NASDAQ: STLD) and Olympic Steel (NASDAQ:ZEUS) are both basic materials companies, but which is the superior investment? We will contrast the two companies based on the strength of their dividends, risk, valuation, analyst recommendations, profitability, institutional ownership and earnings.

Insider and Institutional Ownership

82.6% of Steel Dynamics shares are held by institutional investors. Comparatively, 68.1% of Olympic Steel shares are held by institutional investors. 4.2% of Steel Dynamics shares are held by insiders. Comparatively, 18.3% of Olympic Steel shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Valuation & Earnings

This table compares Steel Dynamics and Olympic Steel’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Steel Dynamics $8.77 billion 0.91 $1.37 billion $2.17 15.31
Olympic Steel $1.21 billion 0.18 $36.12 million $0.75 26.20

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

Profitability

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

Net Margins Return on Equity Return on Assets
Steel Dynamics 6.07% 21.75% 9.34%
Olympic Steel 0.71% 2.82% 1.26%

Dividends

Steel Dynamics pays an annual dividend of $0.62 per share and has a dividend yield of 1.9%. Olympic Steel pays an annual dividend of $0.08 per share and has a dividend yield of 0.4%. Steel Dynamics pays out 28.6% 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.

Volatility & Risk

Steel Dynamics has a beta of 1.26, suggesting that its share price is 26% more volatile than the S&P 500. Comparatively, Olympic Steel has a beta of 1.72, suggesting that its share price is 72% more volatile than the S&P 500.

Analyst Ratings

This is a breakdown of current recommendations and price targets for Steel Dynamics and Olympic Steel, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Steel Dynamics 0 4 11 0 2.73
Olympic Steel 0 2 1 0 2.33

Steel Dynamics presently has a consensus target price of $41.07, indicating a potential upside of 23.60%. Olympic Steel has a consensus target price of $22.33, indicating a potential upside of 13.66%. Given Steel Dynamics’ stronger consensus rating and higher possible upside, equities research analysts plainly believe Steel Dynamics is more favorable than Olympic Steel.

Summary

Steel Dynamics beats Olympic Steel on 12 of the 16 factors compared between the two stocks.

Steel Dynamics Company Profile

Steel Dynamics, Inc. is a steel producing and a metal recycling company. The Company is engaged in the manufacture and sale of steel products, processing and sale of recycled ferrous and nonferrous metals, and fabrication and sale of steel joists and deck products. Its segments include steel operations, metals recycling operations, steel fabrication operations and Other Operations. It offers a range of steel products, such as sheet products, long products and steel finishing. The steel operations segment includes Butler Flat Roll Division, Columbus Flat Roll Division, The Techs galvanizing lines, Structural and Rail Division, Engineered Bar Products Division, Roanoke Bar Division, Steel of West Virginia and Iron Dynamics. The metals recycling operations segment consists of OmniSource Corporation. The fabrication operations produce steel building components. The Other Operations segment consists of subsidiary operations and smaller joint ventures.

Olympic Steel Company Profile

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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