Analyzing Braskem (NYSE:BAK) & Westlake Chemical (WLK)

Westlake Chemical (NYSE: WLK) and Braskem (NYSE:BAK) are both large-cap basic materials companies, but which is the superior investment? We will compare the two businesses based on the strength of their dividends, risk, analyst recommendations, earnings, valuation, profitability and institutional ownership.

Valuation and Earnings

This table compares Westlake Chemical and Braskem’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Westlake Chemical $5.08 billion 2.85 $398.85 million $4.61 24.32
Braskem $13.74 billion 0.81 -$117.96 million $0.89 31.22

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

Dividends

Westlake Chemical pays an annual dividend of $0.84 per share and has a dividend yield of 0.7%. Braskem pays an annual dividend of $0.75 per share and has a dividend yield of 2.7%. Westlake Chemical pays out 18.2% of its earnings in the form of a dividend. Braskem pays out 84.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Westlake Chemical has increased its dividend for 2 consecutive years and Braskem has increased its dividend for 14 consecutive years. Braskem is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

This table compares Westlake Chemical and Braskem’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Westlake Chemical 7.74% 15.59% 5.95%
Braskem 3.07% 28.41% 2.59%

Insider and Institutional Ownership

30.4% of Westlake Chemical shares are held by institutional investors. Comparatively, 0.6% of Braskem shares are held by institutional investors. 72.5% of Westlake Chemical shares are held by company insiders. Comparatively, 0.0% of Braskem shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company will outperform the market over the long term.

Analyst Recommendations

This is a breakdown of current ratings and recommmendations for Westlake Chemical and Braskem, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Westlake Chemical 0 5 9 0 2.64
Braskem 0 0 1 0 3.00

Westlake Chemical currently has a consensus target price of $107.25, suggesting a potential downside of 4.34%. Given Westlake Chemical’s higher possible upside, equities research analysts clearly believe Westlake Chemical is more favorable than Braskem.

Risk & Volatility

Westlake Chemical has a beta of 1.72, suggesting that its stock price is 72% more volatile than the S&P 500. Comparatively, Braskem has a beta of 1.05, suggesting that its stock price is 5% more volatile than the S&P 500.

Summary

Westlake Chemical beats Braskem on 11 of the 17 factors compared between the two stocks.

Westlake Chemical Company Profile

Westlake Chemical Corporation is a global manufacturer and marketer of basic chemicals, vinyls, polymers and building products. The Company’s products include a range of chemicals, which are fundamental to various consumer and industrial markets, including flexible and rigid packaging, automotive products, coatings, water treatment, refrigerants, residential and commercial construction, as well as other durable and non-durable goods. Its segments include Olefins and Vinyls. It manufactures ethylene (through Westlake Chemical OpCo LP (OpCo)), polyethylene, styrene and associated co-products at its manufacturing facility in Lake Charles and polyethylene at its Longview facility. The Company’s products in its Vinyls segment include polyvinyl chloride (PVC), vinyl chloride monomer (VCM), ethylene dichloride (EDC), chlor-alkali (chlorine and caustic soda) and chlorinated derivative products and, through OpCo, ethylene. It also manufactures and sells building products fabricated from PVC.

Braskem Company Profile

Braskem S.A. produces thermoplastic resins. The Company’s segments are Basic petrochemicals, Polyolefins, Vinyls, the United States and Europe, and Chemical distribution. It is also engaged in the import and export of chemicals, petrochemicals and fuels, the production, supply and sale of utilities such as steam, water, compressed air, industrial gases, the provision of industrial services, and the production, supply and sale of electric energy. It also invests in other companies, either as a partner or as shareholder. It operates over 40 industrial units, over 30 of which are located in the Brazilian states of Alagoas, Bahia, Rio de Janeiro, Rio Grande do Sul and Sao Paulo; over five are located in the United States, in the states of Pennsylvania, Texas and West Virginia, and over two are located in Germany, in the cities of Wesseling and Schkopau. These units produce thermoplastic resins–polyethylene, polypropylene and polyvinyl chloride, as well as basic petrochemicals.

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