Reviewing NewMarket (NYSE:NEU) and Koppers (NYSE:KOP)

NewMarket (NYSE:NEU) and Koppers (NYSE:KOP) are both materials companies, but which is the better business? We will contrast the two companies based on the strength of their earnings, institutional ownership, risk, analyst recommendations, dividends, valuation and profitability.

Dividends

NewMarket pays an annual dividend of $13.00 per share and has a dividend yield of 1.9%. Koppers pays an annual dividend of $0.36 per share and has a dividend yield of 1.2%. NewMarket pays out 26.4% of its earnings in the form of a dividend. Koppers pays out -7.0% 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. NewMarket has increased its dividend for 7 consecutive years and Koppers has increased its dividend for 2 consecutive years. NewMarket is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Valuation & Earnings

This table compares NewMarket and Koppers”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
NewMarket	$2.77 billion	2.31	$418.75 million	$49.31	14.12
Koppers	$1.91 billion	0.31	$56.00 million	($5.14)	-6.04

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

Profitability

This table compares NewMarket and Koppers’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
NewMarket	16.51%	25.12%	12.82%
Koppers	-5.03%	14.17%	3.76%

Insider & Institutional Ownership

61.1% of NewMarket shares are held by institutional investors. Comparatively, 92.7% of Koppers shares are held by institutional investors. 8.6% of NewMarket shares are held by insiders. Comparatively, 7.3% of Koppers shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Analyst Ratings

This is a breakdown of current ratings and price targets for NewMarket and Koppers, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
NewMarket	0	0	1	0	3.00
Koppers	1	1	2	1	2.60

Koppers has a consensus target price of $54.50, indicating a potential upside of 75.47%. Given Koppers’ higher possible upside, analysts plainly believe Koppers is more favorable than NewMarket.

Volatility & Risk

NewMarket has a beta of 0.59, suggesting that its stock price is 41% less volatile than the S&P 500. Comparatively, Koppers has a beta of 1.23, suggesting that its stock price is 23% more volatile than the S&P 500.

Summary

NewMarket beats Koppers on 12 of the 18 factors compared between the two stocks.

About NewMarket

NewMarket Corporation is a Richmond, Virginia-based holding company whose principal business is petroleum additives, conducted through its subsidiary Afton Chemical Corporation. Afton develops, manufactures and markets additives that help improve the performance of fuels and lubricants, serving customers across the energy and transportation industries. Afton’s products include fuel additives and lubricant additives for applications such as engine oils, driveline fluids and industrial lubricants.

About Koppers

Koppers is a global provider of treated wood products, wood preservation chemicals and carbon compounds. Its products and services support infrastructure and industrial markets, including railroads, utilities and construction. The company’s Railroad and Utility Products and Services business supplies treated railroad ties, utility poles and related products, along with services such as track maintenance and wood-pole inspection. Its Performance Chemicals business produces wood preservatives and offers treatment solutions to help protect wood from decay and insects.