Gerdau (NYSE:GGB) and Wesfarmers (NYSE:NPSCY) Critical Review
Gerdau (NYSE:GGB) and Wesfarmers (OTCMKTS:NPSCY) are both mid-cap basic materials companies, but which is the better stock? We will compare the two companies based on the strength of their institutional ownership, risk, valuation, dividends, analyst recommendations, earnings and profitability.
This is a breakdown of recent ratings for Gerdau and Wesfarmers, as reported by MarketBeat.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
Insider & Institutional Ownership
9.0% of Gerdau shares are held by institutional investors. Comparatively, 0.0% of Wesfarmers shares are held by institutional investors. 0.0% of Gerdau shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.
Risk and Volatility
Gerdau has a beta of 2.11, suggesting that its share price is 111% more volatile than the S&P 500. Comparatively, Wesfarmers has a beta of 1.31, suggesting that its share price is 31% more volatile than the S&P 500.
Earnings and Valuation
This table compares Gerdau and Wesfarmers’ gross revenue, earnings per share and valuation.
|Gross Revenue||Price/Sales Ratio||Net Income||Earnings Per Share||Price/Earnings Ratio|
|Gerdau||$10.05 billion||0.36||$308.36 million||$0.40||5.25|
|Wesfarmers||$55.60 billion||0.16||$2.26 billion||$2.54||3.75|
Wesfarmers has higher revenue and earnings than Gerdau. Wesfarmers is trading at a lower price-to-earnings ratio than Gerdau, indicating that it is currently the more affordable of the two stocks.
Gerdau pays an annual dividend of $0.05 per share and has a dividend yield of 2.4%. Wesfarmers pays an annual dividend of $0.12 per share and has a dividend yield of 1.3%. Gerdau pays out 12.5% of its earnings in the form of a dividend. Wesfarmers pays out 4.7% 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. Gerdau has increased its dividend for 2 consecutive years. Gerdau is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.
This table compares Gerdau and Wesfarmers’ net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
Gerdau beats Wesfarmers on 10 of the 14 factors compared between the two stocks.
Gerdau S.A. provides steel-related products and services worldwide. It operates through four segments: Brazil Operations, North America Operations, South America Operations, and Special Steel Operations. The company offers semi-finished products, including billets, blooms, and slabs; common long rolled products, such as rebars, wire rods, merchant bars, light shapes, and profiles, which are used primarily in the construction and manufacturing industries; and drawn products comprising barbed and barbless fence wires, galvanized wires, fences, concrete reinforcing wire meshes, nails, and clamps, as well as mines and produces iron ore. It also produces special steel products for use in auto parts, light and heavy vehicles, and agricultural machinery, as well as the oil and gas, wind energy, machinery and equipment, mining and rail, and others markets. In addition, the company offers flat products comprising hot rolled coils and heavy plates; and resells flat steel products. It sells its products through independent distributors, direct sales from the mills, and its retail network. The company was founded in 1901 and is based in Sao Paulo, Brazil. Gerdau S.A. is a subsidiary of Metalúrgica Gerdau S.A.
Nippon Steel Corporation, together with its subsidiaries, engages in steelmaking and steel fabrication, engineering and construction, chemicals and materials, and system solutions businesses in Japan and internationally. The Steelmaking and Steel Fabrication segment offers steel plates and sheets; bars, beams, shapes, and rods; pipes and tubes; railway, automotive, and machinery parts; and stainless steel and titanium. The Engineering and Construction segment plans, designs, and constructs various construction projects, including industrial plants, environmental and energy plants, civil engineering projects, and large steel structures, such as skyscrapers and oil and gas pipelines. This segment also involved in the manufacturing and sale of industrial machinery, and equipment and steel structures; and waste processing and recycling, and supplying of electricity, gas, and heat. The Chemicals and Materials segment produces and sells various materials, including coal-based chemical products, petrochemicals, electronic materials, and components for semiconductors and electronic parts, carbon fiber, and composite products, as well as products that apply technologies for metal processing. The System Solutions segment provides computer system engineering and consulting services, information technology outsourcing services, and other client-oriented information technology business solutions to customers in manufacturing and consumer products industries. The company serves automotive, energy and resources, construction, appliance, machinery, equipment, and transportation industries. The company was formerly known as Nippon Steel & Sumitomo Metal Corporation and changed its name to Nippon Steel Corporation in April 2019. Nippon Steel Corporation was founded in 1949 and is based in Tokyo, Japan.
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