Ecolab (NYSE: ECL) and Valvoline (NYSE:VVV) are both mid-cap basic materials companies, but which is the better stock? We will compare the two businesses based on the strength of their earnings, institutional ownership, dividends, valuation, analyst recommendations, profitability and risk.

Insider and Institutional Ownership

75.4% of Ecolab shares are held by institutional investors. Comparatively, 92.3% of Valvoline shares are held by institutional investors. 1.5% of Ecolab shares are held by insiders. Comparatively, 0.1% of Valvoline shares are held 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.

Profitability

This table compares Ecolab and Valvoline’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Ecolab 9.66% 18.93% 6.97%
Valvoline 13.00% -106.06% 14.55%

Dividends

Ecolab pays an annual dividend of $1.48 per share and has a dividend yield of 1.1%. Valvoline pays an annual dividend of $0.20 per share and has a dividend yield of 0.8%. Ecolab pays out 33.8% of its earnings in the form of a dividend. Valvoline pays out 15.5% 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. Valvoline has increased its dividend for 31 consecutive years.

Analyst Recommendations

This is a breakdown of recent ratings and recommmendations for Ecolab and Valvoline, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Ecolab 0 9 6 0 2.40
Valvoline 0 3 3 0 2.50

Ecolab presently has a consensus target price of $133.23, suggesting a potential upside of 0.32%. Valvoline has a consensus target price of $25.00, suggesting a potential upside of 4.04%. Given Valvoline’s stronger consensus rating and higher possible upside, analysts clearly believe Valvoline is more favorable than Ecolab.

Earnings & Valuation

This table compares Ecolab and Valvoline’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Ecolab $13.36 billion 2.88 $2.89 billion $4.38 30.32
Valvoline $2.03 billion 2.40 $520.00 million $1.29 18.63

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

Summary

Ecolab beats Valvoline on 9 of the 16 factors compared between the two stocks.

About Ecolab

Ecolab Inc. provides water, hygiene and energy technologies and services. The Company’s cleaning and sanitizing programs and products, pest elimination services and equipment maintenance and repair services support customers in the foodservice, food and beverage processing, hospitality, healthcare, government and education, retail, textile care and commercial facilities management sectors in over 170 countries. Its segments include Global Industrial, Global Institutional, Global Energy, Other and Corporate. Its Global Industrial segment consists of the Water, Food and Beverage, Paper and Textile Care operating units. Its Global Institutional segment consists of the Institutional, Specialty and Healthcare operating units. The Global Energy segment provides on-site and technology-driven solutions to the global drilling, oil and gas production, refining, and petrochemical industries. The Company’s Other segment consists of the Pest Elimination and Equipment Care operating units.

About Valvoline

Valvoline Inc. (Valvoline) is engaged in the production and distribution of automotive, commercial and industrial lubricants, and automotive chemicals. The Company operates through three segments: Core North America, Quick Lubes and International. The Core North America segment sells Valvoline, and other branded and private label products in the United States and Canada to both consumers performing their own automotive maintenance, referred to as Do-It-Yourself (DIY) consumers, as well as, to installer customers using Valvoline products to service vehicles owned by Do-It-For-Me (DIFM) consumers. Its Quick Lubes segment services the passenger car and light truck quick lube market through platforms, including its franchised Valvoline Instant Oil Change (VIOC) stores and Express Care. Its International segment sells Valvoline and other branded products through its affiliates, joint ventures, licensees and independent distributors. Its products include All Climate, DuraBlend and MaxLife.

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