Critical Comparison: A. Schulman (SHLM) vs. Quaker Chemical (KWR)

A. Schulman (NASDAQ: SHLM) and Quaker Chemical (NYSE:KWR) are both basic materials companies, but which is the better stock? We will compare the two companies based on the strength of their dividends, institutional ownership, analyst recommendations, profitability, valuation, earnings and risk.

Analyst Ratings

This is a breakdown of current ratings for A. Schulman and Quaker Chemical, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
A. Schulman 0 1 1 0 2.50
Quaker Chemical 0 3 0 0 2.00

A. Schulman currently has a consensus price target of $37.00, suggesting a potential downside of 0.80%. Quaker Chemical has a consensus price target of $161.00, suggesting a potential upside of 1.28%. Given Quaker Chemical’s higher probable upside, analysts clearly believe Quaker Chemical is more favorable than A. Schulman.

Profitability

This table compares A. Schulman and Quaker Chemical’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
A. Schulman 1.35% 31.20% 3.06%
Quaker Chemical 5.93% 15.43% 9.20%

Risk and Volatility

A. Schulman has a beta of 1.57, indicating that its share price is 57% more volatile than the S&P 500. Comparatively, Quaker Chemical has a beta of 1.35, indicating that its share price is 35% more volatile than the S&P 500.

Insider and Institutional Ownership

79.2% of A. Schulman shares are held by institutional investors. Comparatively, 86.7% of Quaker Chemical shares are held by institutional investors. 3.3% of A. Schulman shares are held by company insiders. Comparatively, 3.6% of Quaker Chemical shares are held by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Valuation and Earnings

This table compares A. Schulman and Quaker Chemical’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
A. Schulman $2.46 billion 0.45 $33.02 million $0.87 42.87
Quaker Chemical $746.66 million 2.83 $61.40 million $3.55 44.78

Quaker Chemical has lower revenue, but higher earnings than A. Schulman. A. Schulman is trading at a lower price-to-earnings ratio than Quaker Chemical, indicating that it is currently the more affordable of the two stocks.

Dividends

A. Schulman pays an annual dividend of $0.82 per share and has a dividend yield of 2.2%. Quaker Chemical pays an annual dividend of $1.42 per share and has a dividend yield of 0.9%. A. Schulman pays out 94.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Quaker Chemical pays out 40.0% of its earnings in the form of a dividend. A. Schulman has raised its dividend for 7 consecutive years. A. Schulman is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

Quaker Chemical beats A. Schulman on 10 of the 17 factors compared between the two stocks.

A. Schulman Company Profile

A. Schulman, Inc. is an international supplier of plastic formulations, resins and services, and provides solutions to its customers’ requirements through custom-formulated products. The Company’s customers span a range of markets, such as packaging, mobility, building and construction, electronics and electrical, agriculture, personal care and hygiene, custom services, and sports, home and leisure. The Company’s segments include Europe, Middle East and Africa (EMEA), the United States and Canada (USCAN), Latin America (LATAM), Asia Pacific (APAC) and Engineered Composites (EC). As of August 31, 2016, the Company operated in six product families, including custom performance colors (CPC), engineered composites, Masterbatch solutions, engineered plastics, specialty powders and distribution services. The CPC product family offers powdered, pelletized and liquid color concentrates that are custom-designed for thermoplastic resins.

Quaker Chemical Company Profile

Quaker Chemical Corporation is a provider of process fluids, chemical specialties, and technical expertise to a range of industries, including steel, aluminum, mining, aerospace, tube and pipe, cans and others. The Company’s segments include North America, Europe, Middle East and Africa (EMEA), Asia/Pacific and South America. It develops, produces, and markets a range of formulated chemical specialty products and offers chemical management services. Its products and services include rolling lubricants (used by manufacturers of steel in the hot and cold rolling of steel and by manufacturers of aluminum in the hot rolling of aluminum); machining and grinding compounds (used by metalworking customers in cutting, shaping, and grinding metal parts, which require special treatment to enable them to tolerate the manufacturing process, achieve closer tolerance, and improve tool life), and hydraulic fluids (used by steel, metalworking, and other customers to operate hydraulic equipment).

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