Financial Contrast: Stepan (NYSE:SCL) versus Gulf Resources (NASDAQ:GURE)

Gulf Resources (NASDAQ:GURE) and Stepan (NYSE:SCL) are both small-cap basic materials companies, but which is the superior investment? We will compare the two companies based on the strength of their dividends, risk, profitability, institutional ownership, analyst recommendations, earnings and valuation.

Risk & Volatility

Gulf Resources has a beta of 0.36, suggesting that its share price is 64% less volatile than the S&P 500. Comparatively, Stepan has a beta of 1.05, suggesting that its share price is 5% more volatile than the S&P 500.

Profitability

This table compares Gulf Resources and Stepan’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Gulf Resources	-286.77%	-20.62%	-17.50%
Stepan	1.96%	3.70%	1.88%

Analyst Ratings

This is a breakdown of current ratings and recommmendations for Gulf Resources and Stepan, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Gulf Resources	1	0	0	0	1.00
Stepan	1	1	0	0	1.50

Earnings & Valuation

This table compares Gulf Resources and Stepan”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Gulf Resources	$7.66 million	0.67	-$58.94 million	($48.05)	-0.08
Stepan	$2.18 billion	0.49	$50.37 million	$1.98	23.82

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

Institutional and Insider Ownership

3.3% of Gulf Resources shares are held by institutional investors. Comparatively, 82.7% of Stepan shares are held by institutional investors. 3.2% of Gulf Resources shares are held by insiders. Comparatively, 6.9% of Stepan shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock is poised for long-term growth.

Summary

Stepan beats Gulf Resources on 11 of the 12 factors compared between the two stocks.

About Gulf Resources

Gulf Resources, Inc., through its subsidiaries, manufactures and trades bromine and crude salt, chemical products, and natural gas in the People’s Republic of China. The company operates through four segments: Bromine, Crude salt, Chemical products, and Natural gas segments. It also provides bromine for use in bromine compounds, intermediates in organic synthesis, brominated flame retardants, fumigants, water purification compounds, dyes, medicines, and disinfectants. In addition, the company offers crude salt for use as a material in alkali and chlorine alkali production for use in the chemical, food and beverage, and other industries. In addition, it manufactures and sells chemical products for use in oil and gas field exploration, oil and gas distribution, oil field drilling, papermaking chemical agents, and inorganic chemicals, as well as materials that are used for human and animal antibiotics. The company is based in Shouguang, the People’s Republic of China.

About Stepan

Stepan Company, together with its subsidiaries, produces and sells specialty and intermediate chemicals to other manufacturers for use in various end products worldwide. It operates through three segments: Surfactants, Polymers, and Specialty Products. The Surfactants segment offers surfactants that are used in consumer and industrial cleaning and disinfection products, including detergents for washing clothes, dishes, carpets, and floors and walls, as well as shampoos and body washes; and other applications, such as fabric softeners, germicidal quaternary compounds, disinfectants, and lubricating ingredients. Its surfactants are also used in various applications, including emulsifiers for spreading agricultural products; and industrial applications comprising latex systems, plastics, and composites. The Polymers segment provides polyurethane polyols that are used in the manufacture of rigid foam for thermal insulation in the construction industry, as well as a base raw material for coatings, adhesives, sealants, and elastomers (CASE); polyester resins, including liquid and powdered products, which are used in CASE applications; and phthalic anhydride that is used in unsaturated polyester resins, alkyd resins, and plasticizers for applications in construction materials, as well as components of automotive, boating, and other consumer products. The Specialty Products segment offers flavors, emulsifiers, and solubilizers for use in food, flavoring, nutritional supplement, and pharmaceutical applications. Stepan Company was founded in 1932 and is headquartered in Northbrook, Illinois.