Head-To-Head Analysis: Rayonier Advanced Materials (NYSE:RYAM) and Stepan (SCL)

Stepan (NYSE: SCL) and Rayonier Advanced Materials (NYSE:RYAM) are both small-cap specialty chemicals – nec companies, but which is the superior stock? We will compare the two businesses based on the strength of their valuation, institutional ownership, analyst recommendations, profitability, dividends, risk and earnings.

Analyst Recommendations

This is a breakdown of current ratings and price targets for Stepan and Rayonier Advanced Materials, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Stepan 0 2 2 1 2.80
Rayonier Advanced Materials 0 0 5 0 3.00

Stepan presently has a consensus target price of $36.25, suggesting a potential downside of 54.37%. Rayonier Advanced Materials has a consensus target price of $19.20, suggesting a potential upside of 14.56%. Given Rayonier Advanced Materials’ stronger consensus rating and higher probable upside, analysts clearly believe Rayonier Advanced Materials is more favorable than Stepan.

Valuation & Earnings

This table compares Stepan and Rayonier Advanced Materials’ top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio NetIncome Earnings Per Share Price/Earnings Ratio
Stepan $1.77 billion 1.01 $86.19 million $3.93 20.22
Rayonier Advanced Materials $869.00 million 0.83 $73.28 million $0.64 26.19

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

Dividends

Stepan pays an annual dividend of $0.82 per share and has a dividend yield of 1.0%. Rayonier Advanced Materials pays an annual dividend of $0.28 per share and has a dividend yield of 1.7%. Stepan pays out 20.9% of its earnings in the form of a dividend. Rayonier Advanced Materials pays out 43.8% 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. Rayonier Advanced Materials has raised its dividend for 49 consecutive years. Rayonier Advanced Materials is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Volatility & Risk

Stepan has a beta of 1.28, suggesting that its stock price is 28% more volatile than the S&P 500. Comparatively, Rayonier Advanced Materials has a beta of 4.27, suggesting that its stock price is 327% more volatile than the S&P 500.

Profitability

This table compares Stepan and Rayonier Advanced Materials’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Stepan 4.81% 13.98% 6.91%
Rayonier Advanced Materials 4.98% 18.12% 2.79%

Insider and Institutional Ownership

62.1% of Stepan shares are held by institutional investors. Comparatively, 93.2% of Rayonier Advanced Materials shares are held by institutional investors. 13.1% of Stepan shares are held by company insiders. Comparatively, 2.1% of Rayonier Advanced Materials shares are held by company 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

Rayonier Advanced Materials beats Stepan on 10 of the 18 factors compared between the two stocks.

Stepan Company Profile

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.

Rayonier Advanced Materials Company Profile

Rayonier Advanced Materials Inc. is engaged in the production of cellulose specialties. The Company’s product lines include cellulose specialties and commodity products. Its products are used in manufacturing processes. The Company’s products are sold throughout the world to companies for use in various industrial applications, and to produce a range of products, including cigarette filters, foods, pharmaceuticals, textiles and electronics. The Company focuses on producing various forms of cellulose specialties products, such as cellulose acetate and cellulose ethers. The Company’s production facilities are located in Jesup, Georgia and Fernandina Beach, Florida. The Jesup plant can produce cellulose specialties or commodity products using both hardwood and softwood in a pre-hydrolyzed kraft or high potential of hydrogen (pH) cooking process. The Fernandina Beach plant can produce cellulose specialties or commodity products using softwood in a sulfite or low pH cooking process.

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