Critical Review: Valhi (NYSE:VHI) and Oil-Dri Corporation Of America (NYSE:ODC)

Oil-Dri Corporation Of America (NYSE:ODC) and Valhi (NYSE:VHI) are both small-cap basic materials companies, but which is the better investment? We will contrast the two companies based on the strength of their institutional ownership, valuation, earnings, analyst recommendations, profitability, risk and dividends.

Analyst Recommendations

This is a summary of current ratings and recommmendations for Oil-Dri Corporation Of America and Valhi, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Oil-Dri Corporation Of America	0	0	1	0	3.00
Valhi	2	0	0	0	1.00

Valhi has a consensus target price of $12.00, indicating a potential downside of 11.93%. Given Valhi’s higher probable upside, analysts clearly believe Valhi is more favorable than Oil-Dri Corporation Of America.

Risk & Volatility

Oil-Dri Corporation Of America has a beta of 0.77, indicating that its stock price is 23% less volatile than the S&P 500. Comparatively, Valhi has a beta of 1.18, indicating that its stock price is 18% more volatile than the S&P 500.

Earnings and Valuation

This table compares Oil-Dri Corporation Of America and Valhi”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Oil-Dri Corporation Of America	$485.57 million	1.54	$54.00 million	$3.64	14.12
Valhi	$2.10 billion	0.18	$108.00 million	$0.64	21.29

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

Insider and Institutional Ownership

49.0% of Oil-Dri Corporation Of America shares are owned by institutional investors. Comparatively, 3.8% of Valhi shares are owned by institutional investors. 11.7% of Oil-Dri Corporation Of America shares are owned by insiders. Comparatively, 0.2% of Valhi shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Dividends

Oil-Dri Corporation Of America pays an annual dividend of $0.72 per share and has a dividend yield of 1.4%. Valhi pays an annual dividend of $0.32 per share and has a dividend yield of 2.3%. Oil-Dri Corporation Of America pays out 19.8% of its earnings in the form of a dividend. Valhi pays out 50.0% 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. Oil-Dri Corporation Of America has raised its dividend for 11 consecutive years.

Profitability

This table compares Oil-Dri Corporation Of America and Valhi’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Oil-Dri Corporation Of America	11.10%	21.06%	14.19%
Valhi	0.89%	2.22%	1.13%

Summary

Oil-Dri Corporation Of America beats Valhi on 11 of the 17 factors compared between the two stocks.

About Oil-Dri Corporation Of America

Oil-Dri Corporation of America is a manufacturer and supplier of specialty sorbent products for the pet care, animal health and nutrition, fluids purification, agricultural ingredients, sports field, industrial and automotive markets. It operates through the Business to Business Products Group and Retail and Wholesale Products Group segments. The Business to Business Products Group segment’s customers include processors and refiners of edible oils, jet fuel and biofuel, manufacturers of animal feed and agricultural chemicals, distributors of animal health and nutrition products, and marketers of consumer products. The Retail and Wholesale Products Group segment customers include retailers of cat litter and related accessories such as mass merchandisers, drugstore chains, pet specialty retail outlets, dollar stores, retail grocery stores as well as distributors of industrial cleanup and automotive products, environmental service companies, and sports field product users. The company was founded by Nick Jaffee in 1941 and is headquartered in Chicago, IL.

About Valhi

Valhi, Inc. engages in the chemicals, component products, and real estate management and development businesses in Europe, North America, the Asia Pacific, and internationally. The company’s Chemicals segment produces and markets titanium dioxide pigments (TiO2), which are white inorganic pigments used in various applications by paint, plastics, decorative laminate, and paper manufacturers. It offers TiO2 under the KRONOS name through agents and distributors. The company’s Component Products segment manufactures mechanical and electrical cabinet locks, and other locking mechanisms for use in ignition systems, mailboxes, file cabinets, desk drawers, tool storage cabinets, vending and cash containment machines, integrated inventory and access control secured narcotics boxes, medical cabinetry security, electronic circuit panels, storage compartments, and gas station security applications. It also provides stainless steel exhaust components, gauges, throttle controls, wake enhancement systems, trim tabs, and related hardware and accessories primarily for performance and ski/wakeboard boats. The company’s Real Estate Management and Development segment offers utility services to industrial and municipal customers; owns real properties; and develops land holdings for commercial, industrial, and residential purposes. It also holds marketable securities and other investments. The company was incorporated in 1932 and is based in Dallas, Texas. Valhi, Inc. is a subsidiary of Dixie Rice Agricultural L.L.C.