Critical Analysis: AdvanSix (NYSE:ASIX) and Sherwin-Williams (NYSE:SHW)

Sherwin-Williams (NYSE:SHW) and AdvanSix (NYSE:ASIX) are both basic materials companies, but which is the superior business? We will contrast the two businesses based on the strength of their profitability, analyst recommendations, institutional ownership, dividends, risk, earnings and valuation.

Analyst Ratings

This is a summary of recent recommendations and price targets for Sherwin-Williams and AdvanSix, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Sherwin-Williams	0	4	12	1	2.82
AdvanSix	1	0	1	0	2.00

Sherwin-Williams presently has a consensus target price of $388.88, suggesting a potential upside of 10.20%. AdvanSix has a consensus target price of $33.50, suggesting a potential upside of 80.91%. Given AdvanSix’s higher possible upside, analysts clearly believe AdvanSix is more favorable than Sherwin-Williams.

Institutional & Insider Ownership

77.7% of Sherwin-Williams shares are owned by institutional investors. Comparatively, 86.4% of AdvanSix shares are owned by institutional investors. 0.6% of Sherwin-Williams shares are owned by insiders. Comparatively, 5.6% of AdvanSix shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Profitability

This table compares Sherwin-Williams and AdvanSix’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Sherwin-Williams	11.05%	66.75%	11.37%
AdvanSix	3.52%	7.14%	3.50%

Risk & Volatility

Sherwin-Williams has a beta of 1.26, suggesting that its share price is 26% more volatile than the S&P 500. Comparatively, AdvanSix has a beta of 1.71, suggesting that its share price is 71% more volatile than the S&P 500.

Dividends

Sherwin-Williams pays an annual dividend of $3.16 per share and has a dividend yield of 0.9%. AdvanSix pays an annual dividend of $0.64 per share and has a dividend yield of 3.5%. Sherwin-Williams pays out 30.8% of its earnings in the form of a dividend. AdvanSix pays out 33.3% 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. Sherwin-Williams has increased its dividend for 48 consecutive years and AdvanSix has increased its dividend for 2 consecutive years.

Earnings & Valuation

This table compares Sherwin-Williams and AdvanSix”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Sherwin-Williams	$23.10 billion	3.79	$2.68 billion	$10.25	34.43
AdvanSix	$1.52 billion	0.33	$44.15 million	$1.92	9.64

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

Summary

Sherwin-Williams beats AdvanSix on 13 of the 18 factors compared between the two stocks.

About Sherwin-Williams

The Sherwin-Williams Company engages in the development, manufacture, distribution, and sale of paints, coating, and related products to professional, industrial, commercial, and retail customers. It operates through three segments: Paint Stores Group, Consumer Brands Group, and Performance Coatings Group. The Paint Stores Group segment offers architectural paints and coatings, and protective and marine products, as well as OEM product finishes and related products for architectural and industrial paint contractors, and do-it-yourself homeowners. The Consumer Brands Group segment supplies a portfolio of branded and private-label architectural paints, stains, varnishes, industrial products, wood finishes products, wood preservatives, applicators, corrosion inhibitors, aerosols, caulks, and adhesives to retailers, including home centers and hardware stores, and dedicated dealers and distributors. The Performance Coatings Group segment develops and sells industrial coatings for wood finishing and general industrial applications, automotive refinish products, protective and marine coatings, coil coatings, packaging coatings, and performance-based resins and colorants. It serves retailers, dealers, jobbers, licensees, and other third-party distributors through its branches and direct sales staff, as well as through outside sales representatives. The company has operations primarily in the North and South America, the Caribbean, Europe, Asia, and Australia. The Sherwin-Williams Company was founded in 1866 and is headquartered in Cleveland, Ohio.

About AdvanSix

AdvanSix Inc. engages in the manufacture and sale of polymer resins in the United States and internationally. It offers Nylon 6, a polymer resin, which is a synthetic material used to produce fibers, filaments, engineered plastics, and films. The company also provides caprolactam to manufacture polymer resins; ammonium sulfate fertilizers to distributors, farm cooperatives, and retailers; and acetone that are used in the production of adhesives, paints, coatings, solvents, herbicides, and engineered plastic resins, as well as other intermediate chemicals, including phenol, monoisopropylamine, dipropylamine, monoallylamine, alpha-methylstyrene, cyclohexanone, methyl ethyl ketoxime, acetaldehyde oxime, 2-pentanone oxime, cyclohexanol, sulfuric acid, ammonia, and carbon dioxide. It offers its products under the Aegis, Capran, Sulf-N, Nadone, Naxol, and EZ-Blox brands. The company sells its products directly, as well as through distributors. AdvanSix Inc. was incorporated in 2016 and is headquartered in Parsippany, New Jersey.