Analyzing Cliffs Natural Resources (CLF) & Commercial Metals (CMC)

Commercial Metals (NYSE: CMC) and Cliffs Natural Resources (NYSE:CLF) are both mid-cap basic materials companies, but which is the superior business? We will contrast the two businesses based on the strength of their earnings, valuation, profitability, analyst recommendations, dividends, institutional ownership and risk.

Profitability

This table compares Commercial Metals and Cliffs Natural Resources’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Commercial Metals 1.57% 7.84% 3.42%
Cliffs Natural Resources 2.44% -13.83% 7.41%

Risk and Volatility

Commercial Metals has a beta of 1.22, suggesting that its stock price is 22% more volatile than the S&P 500. Comparatively, Cliffs Natural Resources has a beta of 1.7, suggesting that its stock price is 70% more volatile than the S&P 500.

Valuation & Earnings

This table compares Commercial Metals and Cliffs Natural Resources’ top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Commercial Metals $4.82 billion 0.43 $306.06 million $0.65 27.78
Cliffs Natural Resources $2.34 billion 0.90 $480.50 million $0.22 32.41

Cliffs Natural Resources has higher revenue, but lower earnings than Commercial Metals. Commercial Metals 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.

Institutional and Insider Ownership

90.6% of Commercial Metals shares are owned by institutional investors. Comparatively, 58.3% of Cliffs Natural Resources shares are owned by institutional investors. 1.3% of Commercial Metals shares are owned by insiders. Comparatively, 0.5% of Cliffs Natural Resources shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock will outperform the market over the long term.

Dividends

Commercial Metals pays an annual dividend of $0.48 per share and has a dividend yield of 2.7%. Cliffs Natural Resources does not pay a dividend. Commercial Metals pays out 73.8% of its earnings in the form of a dividend.

Analyst Ratings

This is a breakdown of current recommendations and price targets for Commercial Metals and Cliffs Natural Resources, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Commercial Metals 2 3 3 0 2.13
Cliffs Natural Resources 3 2 3 0 2.00

Commercial Metals presently has a consensus price target of $20.63, suggesting a potential upside of 14.20%. Cliffs Natural Resources has a consensus price target of $8.00, suggesting a potential upside of 12.20%. Given Commercial Metals’ stronger consensus rating and higher probable upside, equities analysts plainly believe Commercial Metals is more favorable than Cliffs Natural Resources.

Summary

Commercial Metals beats Cliffs Natural Resources on 9 of the 15 factors compared between the two stocks.

Commercial Metals Company Profile

Commercial Metals Company, together with its subsidiaries, manufactures, recycles and markets steel and metal products, related materials and services through a network. The Company’s Americas Recycling segment processes scrap metals for use as a raw material by manufacturers of new metal products. The Americas Mills segment consists of steel mills, commonly referred to as minimills that produce reinforcing bar (rebar), angles, flats and rounds. Its Americas Fabrication segment consists of its steel fabrication facilities that bend, weld, cut and fabricate steel, primarily rebar. Its International Mill segment consists of its mill, recycling and fabrication operations located in Poland. Its International Marketing and Distribution segment includes international operations for the sales, distribution and processing of primary and secondary metals, fabricated metals, semi-finished, long and flat steel products, and other industrial products.

Cliffs Natural Resources Company Profile

Cleveland-Cliffs Inc, formerly 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.

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