Cliffs Natural Resources (NYSE: CLF) and L.B. Foster (NASDAQ:FSTR) are both basic materials companies, but which is the superior investment? We will compare the two businesses based on the strength of their analyst recommendations, institutional ownership, profitabiliy, earnings, dividends, risk and valuation.
Risk & Volatility
Cliffs Natural Resources has a beta of 1.69, meaning that its share price is 69% more volatile than the S&P 500. Comparatively, L.B. Foster has a beta of 2.24, meaning that its share price is 124% more volatile than the S&P 500.
Dividends
L.B. Foster pays an annual dividend of $0.04 per share and has a dividend yield of 0.2%. Cliffs Natural Resources does not pay a dividend. L.B. Foster pays out -0.9% of its earnings in the form of a dividend.
Insider & Institutional Ownership
66.6% of Cliffs Natural Resources shares are held by institutional investors. Comparatively, 65.2% of L.B. Foster shares are held by institutional investors. 0.5% of Cliffs Natural Resources shares are held by insiders. Comparatively, 15.2% of L.B. Foster shares are held by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.
Profitability
This table compares Cliffs Natural Resources and L.B. Foster’s net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets | |
| Cliffs Natural Resources | 2.44% | -13.83% | 7.41% |
| L.B. Foster | 2.09% | 9.01% | 3.05% |
Valuation and Earnings
This table compares Cliffs Natural Resources and L.B. Foster’s top-line revenue, earnings per share (EPS) and valuation.
| Gross Revenue | Price/Sales Ratio | EBITDA | Earnings Per Share | Price/Earnings Ratio | |
| Cliffs Natural Resources | $2.34 billion | 0.93 | $480.50 million | $0.22 | 33.50 |
| L.B. Foster | $475.91 million | 0.41 | $20.86 million | ($4.49) | -4.24 |
Cliffs Natural Resources has higher revenue and earnings than L.B. Foster. L.B. Foster is trading at a lower price-to-earnings ratio than Cliffs Natural Resources, indicating that it is currently the more affordable of the two stocks.
Analyst Recommendations
This is a breakdown of recent ratings for Cliffs Natural Resources and L.B. Foster, as provided by MarketBeat.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score | |
| Cliffs Natural Resources | 3 | 2 | 4 | 0 | 2.11 |
| L.B. Foster | 0 | 0 | 0 | 0 | N/A |
Cliffs Natural Resources presently has a consensus price target of $8.29, suggesting a potential upside of 12.42%. Given Cliffs Natural Resources’ higher probable upside, analysts plainly believe Cliffs Natural Resources is more favorable than L.B. Foster.
Summary
Cliffs Natural Resources beats L.B. Foster on 9 of the 14 factors compared between the two stocks.
Cliffs Natural Resources Company Profile
Cliffs Natural Resources Inc. is a mining and natural resources company. The Company is a supplier of iron ore pellets to the North American steel industry from its mines and pellet plants located in Michigan and Minnesota. The Company’s segments include U.S. Iron Ore and Asia Pacific Iron Ore. The Company is a producer of iron ore pellets, primarily selling production from U.S. Iron Ore to integrated steel companies in the United States, Canada and Mexico. Its Asia Pacific Iron Ore operations are located in Western Australia and consist of its Koolyanobbing operation. The Koolyanobbing operations serve the Asian iron ore markets with direct-shipped fines and lump ore. In addition, the Company operates an iron ore mining complex in Western Australia. In the United States, the Company owned four operational iron ore mines and one indefinitely idled mine, as of December 31, 2016. As of December 31, 2016, it operated four iron ore mines located in Michigan and Minnesota.
L.B. Foster Company Profile
L.B. Foster Company is a manufacturer, fabricator and distributor of products and services for the rail, construction, energy and utility markets. The Company’s segments include Rail Products and Services, Construction Products, and Tubular and Energy Services. Its Rail Products segment provides a range of new and used rail, trackwork and accessories to railroads, mines and industry. The Rail segment designs and produces concrete railroad ties, insulated rail joints, power rail, track fasteners, coverboards and special accessories for mass transit and other rail systems. The Construction Products segment sells and rents steel sheet piling, H-bearing pile and other piling products for foundation and earth retention requirements. The Tubular and Energy Services segment supplies pipe coatings for natural gas pipelines and utilities, blending, injection and metering equipment for the oil and gas market, and produces threaded pipe products for industrial water well and irrigation markets.
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