Cabot Corporation (CBT) vs. Stepan (NYSE:SCL) Financial Comparison

Cabot Corporation (NYSE: CBT) and Stepan (NYSE:SCL) are both basic materials companies, but which is the better business? We will compare the two companies based on the strength of their analyst recommendations, risk, earnings, profitabiliy, dividends, valuation and institutional ownership.

Profitability

This table compares Cabot Corporation and Stepan’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Cabot Corporation 8.61% 16.03% 7.24%
Stepan 4.85% 14.95% 7.28%

Volatility and Risk

Cabot Corporation has a beta of 1.05, indicating that its share price is 5% more volatile than the S&P 500. Comparatively, Stepan has a beta of 1.26, indicating that its share price is 26% more volatile than the S&P 500.

Analyst Ratings

This is a breakdown of recent ratings and price targets for Cabot Corporation and Stepan, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Cabot Corporation 0 2 3 0 2.60
Stepan 0 3 1 1 2.60

Cabot Corporation presently has a consensus price target of $59.60, suggesting a potential upside of 14.77%. Stepan has a consensus price target of $44.20, suggesting a potential downside of 44.58%. Given Cabot Corporation’s higher possible upside, equities research analysts clearly believe Cabot Corporation is more favorable than Stepan.

Dividends

Cabot Corporation pays an annual dividend of $1.26 per share and has a dividend yield of 2.4%. Stepan pays an annual dividend of $0.82 per share and has a dividend yield of 1.0%. Cabot Corporation pays out 35.3% of its earnings in the form of a dividend. Stepan pays out 21.5% 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. Cabot Corporation has increased its dividend for 49 consecutive years and Stepan has increased its dividend for 5 consecutive years. Cabot Corporation is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Institutional and Insider Ownership

85.7% of Cabot Corporation shares are owned by institutional investors. Comparatively, 62.0% of Stepan shares are owned by institutional investors. 2.5% of Cabot Corporation shares are owned by company insiders. Comparatively, 13.1% of Stepan shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock will outperform the market over the long term.

Earnings and Valuation

This table compares Cabot Corporation and Stepan’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Cabot Corporation $2.61 billion 1.24 $482.00 million $3.57 14.55
Stepan $1.83 billion 0.98 $207.56 million $3.81 20.93

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

Summary

Cabot Corporation beats Stepan on 10 of the 17 factors compared between the two stocks.

About Cabot Corporation

Cabot Corporation is a global specialty chemicals and performance materials company. The Company operates through four business segments: reinforcement materials, performance chemicals, purification solutions and specialty fluids. Reinforcement materials’ rubber grade carbon blacks are used to enhance the physical properties of the systems and applications in which they are incorporated. Its rubber blacks products are used in tires and industrial products. Performance Chemicals consists of two businesses: specialty carbons and formulations business, and metal oxides business. Purification Solutions’ activated carbon products are used for the purification of water, air and pharmaceuticals, among others, as either a colorant or a decolorizing agent in the production of food and beverage applications. Its specialty fluids segment produces and markets cesium formate as a drilling and completion fluid for use in high pressure and high temperature oil and gas well construction.

About Stepan

Stepan Company produces specialty and intermediate chemicals, which are sold to other manufacturers and used in a range of end products. The Company operates through three segments: Surfactants, Polymers and Specialty Products. The Company’s principal markets include manufacturers of cleaning and washing compounds (including detergents, shampoos, fabric softeners, toothpastes and household cleaners), paints, cosmetics, food, beverages, nutritional supplements, agricultural products and plastics. Its Surfactants segment offers products, which are principal ingredients in consumer and industrial cleaning products, such as detergents for washing clothes, dishes, carpets, floors and walls, as well as shampoos and body washes. Its Polymers segment includes polyurethane polyols, polyester resins and phthalic anhydride. Its Specialty Products segment includes flavors, emulsifiers and solubilizers used in food, flavoring, nutritional supplement and pharmaceutical applications.

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