Contrasting Haynes International (NASDAQ:HAYN) and Schnitzer Steel Industries (SCHN)

Haynes International (NASDAQ: HAYN) and Schnitzer Steel Industries (NASDAQ:SCHN) are both small-cap basic materials companies, but which is the better investment? We will contrast the two companies based on the strength of their valuation, analyst recommendations, profitability, dividends, earnings, risk and institutional ownership.

Risk & Volatility

Haynes International has a beta of 1.51, indicating that its share price is 51% more volatile than the S&P 500. Comparatively, Schnitzer Steel Industries has a beta of 1.33, indicating that its share price is 33% more volatile than the S&P 500.

Profitability

This table compares Haynes International and Schnitzer Steel Industries’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Haynes International -0.84% -1.59% -0.76%
Schnitzer Steel Industries 2.68% 8.34% 4.65%

Institutional and Insider Ownership

96.0% of Haynes International shares are held by institutional investors. Comparatively, 84.5% of Schnitzer Steel Industries shares are held by institutional investors. 4.4% of Haynes International shares are held by company insiders. Comparatively, 3.8% of Schnitzer Steel Industries shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Valuation and Earnings

This table compares Haynes International and Schnitzer Steel Industries’ revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Haynes International $401.97 million 0.92 $13.03 million ($0.28) -106.29
Schnitzer Steel Industries $1.58 billion 0.45 $90.43 million $1.53 16.73

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

Analyst Recommendations

This is a breakdown of current ratings for Haynes International and Schnitzer Steel Industries, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Haynes International 0 2 1 0 2.33
Schnitzer Steel Industries 0 1 0 0 2.00

Haynes International presently has a consensus price target of $37.33, indicating a potential upside of 25.45%. Given Haynes International’s stronger consensus rating and higher probable upside, equities research analysts plainly believe Haynes International is more favorable than Schnitzer Steel Industries.

Dividends

Haynes International pays an annual dividend of $0.88 per share and has a dividend yield of 3.0%. Schnitzer Steel Industries pays an annual dividend of $0.75 per share and has a dividend yield of 2.9%. Haynes International pays out -314.3% of its earnings in the form of a dividend. Schnitzer Steel Industries pays out 49.0% 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.

Summary

Haynes International beats Schnitzer Steel Industries on 9 of the 15 factors compared between the two stocks.

Haynes International Company Profile

Haynes International, Inc. (Haynes) is a producer of nickel- and cobalt-based alloys in flat product forms, such as sheet, coil and plate forms. The Company also produces its products as seamless and welded tubulars, and in slab, bar, billet and wire forms. It focuses on developing, manufacturing, marketing and distributing alloys, which are sold in the aerospace, chemical processing and industrial gas turbine industries. Its products consist of high-temperature resistant alloys (HTA) products and corrosion-resistant alloys (CRA) products. Its HTA products are used in manufacturing components for the hot sections of gas turbine engines. Its CRA products are used in a range of applications, such as chemical processing, power plant emissions control, hazardous waste treatment, sour gas production and pharmaceutical vessels. The Company has a four-high Steckel rolling mill used in hot rolling high-performance alloys. The Company has operations in the United States, Europe and China.

Schnitzer Steel Industries Company Profile

Schnitzer Steel Industries, Inc. is a recycler of ferrous and nonferrous scrap metal, including end-of-life vehicles, and a manufacturer of finished steel products. The Company operates through two segments: the Auto and Metals Recycling (AMR) business and the Steel Manufacturing Business (SMB). The AMR segment collects and recycles auto bodies, rail cars, home appliances, industrial machinery, manufacturing scrap and construction and demolition scrap from bridges, buildings and other infrastructure. AMR’s primary products include recycled ferrous and nonferrous scrap metal. The SMB segment produces finished steel products such as rebar, wire rod, coiled rebar, merchant bar and other specialty products using 100% recycled metal sourced from AMR. SMB’s products are primarily used in nonresidential and infrastructure construction in North America. SMB operates a steel mini-mill in McMinnville, Oregon that produces finished steel products using recycled metal and other raw materials.

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