KMG Chemicals (NYSE: KMG) and Nexeo Solutions (NASDAQ:NXEO) are both small-cap basic materials companies, but which is the superior stock? We will contrast the two companies based on the strength of their earnings, analyst recommendations, institutional ownership, profitability, valuation, dividends and risk.

Analyst Ratings

This is a breakdown of recent recommendations and price targets for KMG Chemicals and Nexeo Solutions, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
KMG Chemicals 0 2 0 0 2.00
Nexeo Solutions 0 2 2 0 2.50

KMG Chemicals currently has a consensus target price of $71.50, indicating a potential downside of 8.53%. Nexeo Solutions has a consensus target price of $11.17, indicating a potential upside of 19.05%. Given Nexeo Solutions’ stronger consensus rating and higher probable upside, analysts plainly believe Nexeo Solutions is more favorable than KMG Chemicals.

Insider & Institutional Ownership

88.9% of KMG Chemicals shares are owned by institutional investors. Comparatively, 96.1% of Nexeo Solutions shares are owned by institutional investors. 6.1% of KMG Chemicals shares are owned by insiders. Comparatively, 0.6% of Nexeo Solutions shares are owned by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company will outperform the market over the long term.

Volatility & Risk

KMG Chemicals has a beta of 0.38, meaning that its stock price is 62% less volatile than the S&P 500. Comparatively, Nexeo Solutions has a beta of 0.25, meaning that its stock price is 75% less volatile than the S&P 500.

Profitability

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

Net Margins Return on Equity Return on Assets
KMG Chemicals 11.87% 16.21% 6.67%
Nexeo Solutions 1.30% 11.16% 2.01%

Valuation & Earnings

This table compares KMG Chemicals and Nexeo Solutions’ gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
KMG Chemicals $333.44 million 3.64 $23.63 million $2.27 34.44
Nexeo Solutions $3.64 billion 0.23 $14.40 million $0.33 28.42

KMG Chemicals has higher earnings, but lower revenue than Nexeo Solutions. Nexeo Solutions 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

KMG Chemicals pays an annual dividend of $0.12 per share and has a dividend yield of 0.2%. Nexeo Solutions does not pay a dividend. KMG Chemicals pays out 5.3% of its earnings in the form of a dividend.

Summary

KMG Chemicals beats Nexeo Solutions on 9 of the 16 factors compared between the two stocks.

KMG Chemicals Company Profile

KMG Chemicals, Inc., through its subsidiaries, manufactures, formulates, and distributes specialty chemicals and performance materials worldwide. The company's Electronic Chemicals segment is involved in the sale of high purity process chemicals primarily to etch and clean silicon wafers in the production of semiconductors, photovoltaics, and flat panel displays. This segment's products include sulfuric, phosphoric, and nitric and hydrofluoric acids; ammonium hydroxide; hydrogen peroxide; isopropyl alcohol; other specialty organic solvents; and various blends of chemicals. Its Performance Materials segment supplies drag-reducing agents, industrial valve lubricants, and cleaners and sealants, as well as related services and equipment, including routine and emergency valve maintenance services and training, to the pipeline and energy services markets. This segment also supplies penta products consisting of solid blocks and concentrated solutions to industrial customers who use these preservatives to pressure treat wood products, as well as sells hydrochloric acid, which is a byproduct of penta production for use in the steel and oil well service industries. KMG Chemicals, Inc. was founded in 1985 and is headquartered in Fort Worth, Texas.

Nexeo Solutions Company Profile

Nexeo Solutions, Inc. operates as a chemical and plastic products distributor in North America, Europe, the Middle East, Africa, and Asia. The company operates through Chemicals, Plastics, and Environmental Services segments. It provides approximately 22,000 products used in various industries, including household, industrial and institutional, lubricants, architectural coatings, adhesives, sealants, elastomers, automotive, healthcare, personal care, oil and gas, and construction. The company was formerly known as WL Ross Holding Corp. and changed its name to Nexeo Solutions, Inc. in June 2016. Nexeo Solutions, Inc. was founded in 2014 and is based in The Woodlands, Texas.

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