Critical Analysis: CMC Materials (NASDAQ:CCMP) versus STMicroelectronics (NYSE:STM)

CMC Materials (NASDAQ:CCMP) and STMicroelectronics (NYSE:STM) are both computer and technology companies, but which is the better stock? We will contrast the two businesses based on the strength of their analyst recommendations, earnings, dividends, valuation, risk, profitability and institutional ownership.

Profitability

This table compares CMC Materials and STMicroelectronics’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
CMC Materials 12.79% 21.30% 9.14%
STMicroelectronics 9.41% 12.69% 7.46%

Risk and Volatility

CMC Materials has a beta of 1.17, meaning that its stock price is 17% more volatile than the S&P 500. Comparatively, STMicroelectronics has a beta of 1.52, meaning that its stock price is 52% more volatile than the S&P 500.

Insider and Institutional Ownership

87.2% of CMC Materials shares are owned by institutional investors. Comparatively, 3.6% of STMicroelectronics shares are owned by institutional investors. 2.4% of CMC Materials shares are owned by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Earnings and Valuation

This table compares CMC Materials and STMicroelectronics’ top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
CMC Materials $1.12 billion 5.12 $142.83 million $7.47 26.21
STMicroelectronics $9.56 billion 3.78 $1.03 billion $1.15 34.49

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

Analyst Recommendations

This is a summary of recent ratings and target prices for CMC Materials and STMicroelectronics, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
CMC Materials 2 4 3 0 2.11
STMicroelectronics 1 4 9 0 2.57

CMC Materials currently has a consensus target price of $155.25, suggesting a potential downside of 20.69%. STMicroelectronics has a consensus target price of $48.00, suggesting a potential upside of 21.03%. Given STMicroelectronics’ stronger consensus rating and higher possible upside, analysts plainly believe STMicroelectronics is more favorable than CMC Materials.

Dividends

CMC Materials pays an annual dividend of $1.84 per share and has a dividend yield of 0.9%. STMicroelectronics pays an annual dividend of $0.14 per share and has a dividend yield of 0.4%. CMC Materials pays out 24.6% of its earnings in the form of a dividend. STMicroelectronics pays out 12.2% 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. CMC Materials has increased its dividend for 4 consecutive years and STMicroelectronics has increased its dividend for 1 consecutive years. CMC Materials is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

CMC Materials beats STMicroelectronics on 10 of the 17 factors compared between the two stocks.

About CMC Materials

CMC Materials, Inc., together with its subsidiaries, provides consumable materials to semiconductor manufacturers, and pipeline and adjacent industry customers in North America, Asia, Europe, the Middle East, Africa, and South America. The company operates through two segments, Electronic Materials and Performance Materials. The Electronic Materials segment provides chemical mechanical planarization (CMP) are used for polishing various materials used in IC devices, including tungsten, dielectric materials, copper, tantalum, and aluminum; and various materials that are used in the production of disk substrates and magnetic heads for hard disk drives; and CMP pads which are used in conjunction with slurries in the CMP process. This segment also offers sulfuric, phosphoric, nitric, and hydrofluoric acids, as well as ammonium hydroxide, hydrogen peroxide, isopropyl alcohol, other specialty organic solvents, and various blends of chemicals. The Performance Materials segment engages in pipeline and industrial materials business; provides routine and emergency maintenance services; polymer-based drag-reducing agents for crude oil transmission; and valve greases, cleaners and sealants, and related services and equipment. This segment also offers precision polishing and metrology systems for advanced optics applications; and magneto-rheological polishing fluids, consumables, and spare and replacement parts, as well as optical polishing services and other customer support services. It also engages in the wood treatment business. The company was formerly known as Cabot Microelectronics Corporation and changed its name to CMC Materials, Inc. in October 2020. CMC Materials, Inc. was founded in 1999 and is headquartered in Aurora, Illinois.

About STMicroelectronics

STMicroelectronics NV designs, develops, manufactures and markets products, which offers discrete and standard commodity components, application-specific integrated circuits, full custom devices and semi-custom devices for analog, digital and mixed-signal applications. It operates through the following segments: Automotive and Discrete Group, Analog and MEMS Group, and Microcontrollers and Digital ICs Group. The Automotive and Discrete Group segment comprises of all dedicated automotive ICs, and discrete and power transistor products. The Analog and MEMS Group segment comprises of low-power high-end analog ICs, smart power products for industrial, computer and consumer markets, touch screen controllers, low power connectivity solutions and metering solutions for smart grid and all MEMS products. The Microcontrollers and Digital ICs Group segment comprises of general purpose and secure microcontrollers, EEPROM memories, and digital ASICs. The company was founded in June 1987 and is headquartered in Plan-Les-Ouates, Switzerland.

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