PolyOne (POL) and Dow Chemical (DWDP) Financial Review

Dow Chemical (NYSE: DWDP) and PolyOne (NYSE:POL) are both mid-cap basic materials companies, but which is the better business? We will contrast the two companies based on the strength of their profitability, valuation, analyst recommendations, risk, earnings, dividends and institutional ownership.

Analyst Recommendations

This is a breakdown of recent ratings and recommmendations for Dow Chemical and PolyOne, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Dow Chemical 1 3 18 0 2.77
PolyOne 0 1 5 0 2.83

Dow Chemical currently has a consensus target price of $79.94, suggesting a potential upside of 10.86%. PolyOne has a consensus target price of $43.17, suggesting a potential downside of 0.77%. Given Dow Chemical’s higher probable upside, analysts plainly believe Dow Chemical is more favorable than PolyOne.

Profitability

This table compares Dow Chemical and PolyOne’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Dow Chemical 5.01% 9.73% 4.18%
PolyOne -1.87% 27.77% 6.61%

Insider and Institutional Ownership

68.7% of Dow Chemical shares are held by institutional investors. Comparatively, 93.7% of PolyOne shares are held by institutional investors. 0.9% of Dow Chemical shares are held by company insiders. Comparatively, 1.6% of PolyOne shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Earnings and Valuation

This table compares Dow Chemical and PolyOne’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Dow Chemical $48.16 billion 3.50 $4.32 billion $2.08 34.67
PolyOne $3.34 billion 1.05 $165.20 million ($0.76) -57.24

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

Volatility & Risk

Dow Chemical has a beta of 1.15, indicating that its share price is 15% more volatile than the S&P 500. Comparatively, PolyOne has a beta of 1.83, indicating that its share price is 83% more volatile than the S&P 500.

Dividends

Dow Chemical pays an annual dividend of $1.52 per share and has a dividend yield of 2.1%. PolyOne pays an annual dividend of $0.70 per share and has a dividend yield of 1.6%. Dow Chemical pays out 73.1% of its earnings in the form of a dividend. PolyOne pays out -92.1% 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. PolyOne has raised its dividend for 5 consecutive years.

Summary

Dow Chemical beats PolyOne on 9 of the 17 factors compared between the two stocks.

About Dow Chemical

DowDuPont Inc. is a holding company formed through the merger of equals between The Dow Chemical Company and E. I. du Pont de Nemours and Company (DuPont). The Company’s business divisions include Agriculture division, Material Science division, and a Specialty Products division. The Agriculture Division offers a complete portfolio of products and technologies, traits and crop protection. The Materials Science Division provides solutions, such as packaging, transportation, infrastructure and customer care. The Specialty Products division provides solution for industrial, safety, energy, food, nutrition, construction, electronics and consumer goods industries. The company provides solutions to a range of markets, including aerospace, automotive, consumer electronics, military, printing, renewable energy, semiconductors, child nutrition, dietary supplements, carpet and apparel, fertilizer, and oil and gas/energy.

About PolyOne

PolyOne Corporation (PolyOne) provides specialized polymer materials, services and solutions. The Company’s segments include Color, Additives and Inks; Specialty Engineered Materials; Performance Products and Solutions, and PolyOne Distribution. The Color, Additives and Inks segment provides custom color and additive concentrates in solid and liquid form for thermoplastics, dispersions for thermosets. The Specialty Engineered Materials segment provides specialty polymer formulations, services and solutions for designers, assemblers and processors of thermoplastic materials. The Performance Products and Solutions segment consists of the Geon Performance Materials and Producer Services business units. As of December 31, 2016, the PolyOne Distribution segment distributed more than 4,000 grades of engineering and commodity grade resins.

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