Financial Review: Haynes International (HAYN) versus Gerdau (GGB)

Haynes International (NASDAQ: HAYN) and Gerdau (NYSE:GGB) are both basic materials companies, but which is the better investment? We will contrast the two businesses based on the strength of their profitability, earnings, analyst recommendations, valuation, institutional ownership, dividends and risk.

Valuation & Earnings

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This table compares Haynes International and Gerdau’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Haynes International $395.21 million 1.25 -$10.19 million ($0.78) -50.54
Gerdau $11.57 billion 0.70 -$112.55 million $0.09 52.44

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

Profitability

This table compares Haynes International and Gerdau’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Haynes International -8.18% -3.76% -1.88%
Gerdau -0.88% 5.50% 2.59%

Dividends

Haynes International pays an annual dividend of $0.88 per share and has a dividend yield of 2.2%. Gerdau pays an annual dividend of $0.03 per share and has a dividend yield of 0.6%. Haynes International pays out -112.8% of its earnings in the form of a dividend. Gerdau pays out 33.3% 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. Haynes International is clearly the better dividend stock, given its higher yield and lower payout ratio.

Risk & Volatility

Haynes International has a beta of 1.37, meaning that its share price is 37% more volatile than the S&P 500. Comparatively, Gerdau has a beta of 2.3, meaning that its share price is 130% more volatile than the S&P 500.

Institutional & Insider Ownership

98.6% of Haynes International shares are held by institutional investors. Comparatively, 4.2% of Gerdau shares are held by institutional investors. 4.6% of Haynes International shares are held by insiders. Comparatively, 0.0% of Gerdau shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Analyst Recommendations

This is a breakdown of recent recommendations for Haynes International and Gerdau, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Haynes International 0 1 2 0 2.67
Gerdau 0 2 6 0 2.75

Haynes International currently has a consensus target price of $36.50, indicating a potential downside of 7.41%. Gerdau has a consensus target price of $4.00, indicating a potential downside of 15.25%. Given Haynes International’s higher possible upside, equities research analysts plainly believe Haynes International is more favorable than Gerdau.

Summary

Gerdau beats Haynes International on 8 of the 15 factors compared between the two stocks.

Haynes International Company Profile

Haynes International, Inc. develops, manufactures, markets, and distributes nickel and cobalt-based alloys in sheet, coil, and plate forms in the United States, Europe, Asia, and internationally. The company offers high-temperature resistant alloys (HTA) and corrosion-resistant alloys (CRA). Its HTA products are used by manufacturers of equipment, including jet engines for the aerospace market; gas turbine engines for power generation and waste incineration; and industrial heating equipment. The company's CRA products are used in various applications, such as chemical processing, power plant emissions control, and hazardous waste treatment. Its products also have applications in flue-gas desulfurization, oil and gas, waste incineration, industrial heat treating, automotive, instrumentation, biopharmaceuticals, and solar and nuclear fuel industries. In addition, the company produces products as seamless and welded tubulars, as well as in slab, bar, billet, and wire forms. It sells its products primarily through direct sales organizations, and network of independent distributors and sales agents. Haynes International, Inc. was founded in 1912 and is headquartered in Kokomo, Indiana.

Gerdau Company Profile

Gerdau S.A. (Gerdau) is a manufacturer of long steel in the North and South America. The Company is engaged in the production and commercialization of steel products in general, through its mills located in Argentina, Brazil, Canada, Chile, Colombia, Spain, the United States, Guatemala, India, Mexico, Peru, the Dominican Republic, Uruguay and Venezuela. Its segments are Brazil Operations, which includes operations of steel and iron ore in Brazil, except Special Steels, and the operation of metallurgical coal and coke in Colombia; North America Operations, which includes all operations in North America, except those of Mexico and Special Steels; South America Operations, which includes operations in South America, except Brazil and the operation of metallurgical coal and coke in Colombia, and Special Steel Operations, including special steel operations in Brazil, Spain, the United States and India. It supplies its customers a range of products, including iron ore semi-finished products.

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