Financial Review: Innophos (IPHS) versus Airgas (ARG)

Innophos (NASDAQ: IPHS) and Airgas (NYSE:ARG) are both basic materials companies, but which is the better stock? We will compare the two companies based on the strength of their institutional ownership, risk, valuation, dividends, analyst recommendations, earnings and profitability.

Earnings and Valuation

This table compares Innophos and Airgas’ top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Innophos $725.34 million 1.24 $47.97 million $2.18 21.13
Airgas N/A N/A N/A $4.53 31.56

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

Profitability

This table compares Innophos and Airgas’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Innophos 6.19% 13.90% 7.26%
Airgas 5.98% 15.44% 5.04%

Dividends

Innophos pays an annual dividend of $1.92 per share and has a dividend yield of 4.2%. Airgas pays an annual dividend of $2.40 per share and has a dividend yield of 1.7%. Innophos pays out 88.1% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Airgas pays out 53.0% of its earnings in the form of a dividend. Innophos has increased its dividend for 15 consecutive years. Innophos is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Recommendations

This is a breakdown of recent ratings for Innophos and Airgas, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Innophos 0 1 1 0 2.50
Airgas 0 0 0 0 N/A

Insider & Institutional Ownership

94.5% of Innophos shares are held by institutional investors. 2.3% of Innophos shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Summary

Innophos beats Airgas on 8 of the 12 factors compared between the two stocks.

About Innophos

Innophos Holdings, Inc. is a producer of nutritional specialty ingredients with applications in food, beverage, dietary supplements, pharmaceutical, oral care and industrial end markets. The Company also provides bioactive mineral and nutritional ingredients. The Company’s segments include Specialty Phosphates US & Canada, Specialty Phosphates Mexico, and Granular Triple Super Phosphate (GTSP) & Other. The Company has four principal product lines: Specialty Ingredients; Food and Technical Grade Purified Phosphoric Acid (PPA); Technical Grade Sodium Tripolyphosphate (STPP), & Detergent Grade PPA, and GTSP & Other. The Company’s bioactive mineral ingredients are mineral-based ingredients for food, beverage and dietary supplement end markets that are manufactured to be readily digestible. The Company has its manufacturing facilities located throughout the United States, Canada, Mexico and China.

About Airgas

Airgas, Inc. is a supplier of industrial, medical and specialty gases, and hard goods, such as welding equipment and related products. The Company is also a producer of atmospheric gases, carbon dioxide, dry ice and nitrous oxide and a supplier of safety products, refrigerants, ammonia products and process chemicals. It operates through two segments: Distribution and All Other Operations. The Distribution segment offers a portfolio of related gas and hard goods products and services to the end customers. The All Other Operations segment consists of five business units which manufacture or distribute carbon dioxide, dry ice, nitrous oxide, ammonia and refrigerant gases. It also offers supply chain management services and solutions, and product and process technical support across many customer segments. It markets its products and services through multiple sales channels, including branch-based sales representatives, retail stores and strategic customer account programs, among others.

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