Contrasting Olympic Steel (NASDAQ:ZEUS) & Freeport-McMoRan (NYSE:FCX)

Olympic Steel (NASDAQ:ZEUS) and Freeport-McMoRan (NYSE:FCX) are both materials companies, but which is the better investment? We will contrast the two businesses based on the strength of their profitability, earnings, valuation, risk, institutional ownership, dividends and analyst recommendations.

Analyst Recommendations

This is a summary of recent ratings for Olympic Steel and Freeport-McMoRan, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Olympic Steel	0	1	0	0	2.00
Freeport-McMoRan	0	4	20	1	2.88

Freeport-McMoRan has a consensus target price of $75.30, suggesting a potential upside of 21.27%. Given Freeport-McMoRan’s stronger consensus rating and higher probable upside, analysts clearly believe Freeport-McMoRan is more favorable than Olympic Steel.

Risk and Volatility

Olympic Steel has a beta of 1.75, suggesting that its stock price is 75% more volatile than the S&P 500. Comparatively, Freeport-McMoRan has a beta of 1.39, suggesting that its stock price is 39% more volatile than the S&P 500.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Olympic Steel	0.73%	2.11%	1.14%
Freeport-McMoRan	13.03%	12.09%	6.50%

Valuation and Earnings

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

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Olympic Steel	$1.90 billion	0.28	$22.98 million	$1.17	40.91
Freeport-McMoRan	$26.44 billion	3.37	$2.20 billion	$2.38	26.09

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

Dividends

Olympic Steel pays an annual dividend of $0.64 per share and has a dividend yield of 1.3%. Freeport-McMoRan pays an annual dividend of $0.30 per share and has a dividend yield of 0.5%. Olympic Steel pays out 54.7% of its earnings in the form of a dividend. Freeport-McMoRan pays out 12.6% 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. Olympic Steel has raised its dividend for 4 consecutive years. Olympic Steel is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Insider and Institutional Ownership

87.1% of Olympic Steel shares are owned by institutional investors. Comparatively, 80.8% of Freeport-McMoRan shares are owned by institutional investors. 13.8% of Olympic Steel shares are owned by insiders. Comparatively, 0.7% of Freeport-McMoRan shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Summary

Freeport-McMoRan beats Olympic Steel on 12 of the 18 factors compared between the two stocks.

About Olympic Steel

Olympic Steel, Inc. processes, distributes, and stores metal products primarily in the United States, Canada, and Mexico. It operates in three segments: Carbon Flat Products; Specialty Metals Flat Products; and Tubular and Pipe Products. The company offers stainless steel and aluminum coil and sheet products, angles, rounds, and flat bars; alloy, heat treated, and abrasion resistant coils, sheets and plates; coated metals, including galvanized, galvannealed, electro galvanized, advanced high strength steels, aluminized, and automotive grades of steel; commercial quality, advanced high strength steel, drawing steel, and automotive grades cold rolled steel coil and sheet products; hot rolled carbon comprising hot rolled coil, pickled and oiled sheet and plate steel products, automotive grades, advanced high strength steels, and high strength low alloys; tube, pipe, and bar products, including round, square, and rectangular mechanical and structural tubing; hydraulic and stainless tubing; boiler tubing; carbon, stainless, and aluminum pipes; valves and fittings; and tin mill products, such as electrolytic tinplate, electrolytic chromium coated steel, and black plates. The company also provides cutting-to-length, slitting, shearing, blanking, tempering, stretcher-leveling, plate and laser processing, forming and machining, tube processing, finishing, and fabrication services, as well as value-added services, such as saw cutting, laser cutting, beveling, threading, and grooving services. It serves metal consuming industries, such as manufacturers and fabricators of transportation and material handling lift equipment, construction, mining and farm equipment, agriculture equipment, storage tanks, environmental and energy generation equipment, automobiles, food service, and electrical equipment, as well as general and plate fabricators, and metals service centers through direct sales force. Olympic Steel, Inc. was founded in 1954 and is based in Highland Hills, Ohio.

About Freeport-McMoRan

Freeport-McMoRan Inc. engages in the mining of mineral properties in North America, South America, and Indonesia. It primarily explores for copper, gold, molybdenum, silver, and other metals. The company's assets include the Grasberg minerals district in Indonesia; Morenci, Bagdad, Safford, Sierrita, and Miami in Arizona; Chino and Tyrone in New Mexico; and Henderson and Climax in Colorado, North America, as well as Cerro Verde in Peru and El Abra in Chile. The company was formerly known as Freeport-McMoRan Copper & Gold Inc. and changed its name to Freeport-McMoRan Inc. in July 2014. Freeport-McMoRan Inc. was incorporated in 1987 and is headquartered in Phoenix, Arizona.