Head to Head Survey: Cabot (CBT) vs. KMG Chemicals (KMG)

Cabot (NYSE: CBT) and KMG Chemicals (NYSE:KMG) are both basic materials companies, but which is the superior investment? We will compare the two companies based on the strength of their dividends, risk, profitability, earnings, analyst recommendations, institutional ownership and valuation.

Earnings & Valuation

This table compares Cabot and KMG Chemicals’ gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Cabot $2.72 billion 1.38 $241.00 million $3.81 15.87
KMG Chemicals $333.44 million 2.47 $23.63 million $1.92 27.92

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

Dividends

Cabot pays an annual dividend of $1.26 per share and has a dividend yield of 2.1%. KMG Chemicals pays an annual dividend of $0.12 per share and has a dividend yield of 0.2%. Cabot pays out 33.1% of its earnings in the form of a dividend. KMG Chemicals pays out 6.3% 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. Cabot has raised its dividend for 5 consecutive years. Cabot is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Insider and Institutional Ownership

84.8% of Cabot shares are held by institutional investors. Comparatively, 56.2% of KMG Chemicals shares are held by institutional investors. 2.5% of Cabot shares are held by company insiders. Comparatively, 6.1% of KMG Chemicals shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Analyst Ratings

This is a summary of current ratings and price targets for Cabot and KMG Chemicals, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Cabot 0 3 4 0 2.57
KMG Chemicals 0 0 2 0 3.00

Cabot presently has a consensus target price of $61.33, suggesting a potential upside of 1.41%. KMG Chemicals has a consensus target price of $50.00, suggesting a potential downside of 6.72%. Given Cabot’s higher possible upside, equities research analysts clearly believe Cabot is more favorable than KMG Chemicals.

Volatility and Risk

Cabot has a beta of 1.11, indicating that its share price is 11% more volatile than the S&P 500. Comparatively, KMG Chemicals has a beta of 0.55, indicating that its share price is 45% less volatile than the S&P 500.

Profitability

This table compares Cabot and KMG Chemicals’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Cabot 8.87% 15.11% 6.95%
KMG Chemicals 7.09% 17.45% 7.28%

Summary

Cabot beats KMG Chemicals on 10 of the 17 factors compared between the two stocks.

About Cabot

Cabot Corporation is a global specialty chemicals and performance materials company. The Company operates through four business segments: reinforcement materials, performance chemicals, purification solutions and specialty fluids. Reinforcement materials’ rubber grade carbon blacks are used to enhance the physical properties of the systems and applications in which they are incorporated. Its rubber blacks products are used in tires and industrial products. Performance Chemicals consists of two businesses: specialty carbons and formulations business, and metal oxides business. Purification Solutions’ activated carbon products are used for the purification of water, air and pharmaceuticals, among others, as either a colorant or a decolorizing agent in the production of food and beverage applications. Its specialty fluids segment produces and markets cesium formate as a drilling and completion fluid for use in high pressure and high temperature oil and gas well construction.

About KMG Chemicals

KMG Chemicals, Inc. manufactures, formulates and globally distributes specialty chemicals. The Company operates businesses selling electronic chemicals, industrial wood treating chemicals, and industrial valve lubricants and sealants. The Company operates through two segments: Electronic chemicals and Other chemicals. The Company operates through its subsidiaries, KMG Electronic Chemicals, Inc. (KMG EC), KMG-Bernuth, Inc. (KMG Bernuth) and KMG Val-Tex, LLC (Val-Tex). The Company’s Electronic chemicals business sells high purity and ultra-purity wet process chemicals primarily to the semiconductor industry. The Company’s Other chemicals segment includes its industrial lubricants business and wood treating chemicals business. The Company’s products sulfuric, phosphoric, nitric and hydrofluoric acids, ammonium hydroxide, hydrogen peroxide, isopropyl alcohol, other specialty organic solvents and various blends of chemicals.

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