Analyzing AK Steel Holding Corporation (AKS) & Timken Steel Corporation (TMST)

AK Steel Holding Corporation (NYSE: AKS) and Timken Steel Corporation (NYSE:TMST) are both small-cap basic materials companies, but which is the better stock? We will compare the two businesses based on the strength of their risk, earnings, valuation, profitabiliy, dividends, institutional ownership and analyst recommendations.

Analyst Recommendations

This is a summary of recent ratings and price targets for AK Steel Holding Corporation and Timken Steel Corporation, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
AK Steel Holding Corporation 1 6 7 2.43
Timken Steel Corporation 2 1 2.33

AK Steel Holding Corporation currently has a consensus target price of $8.05, suggesting a potential upside of 23.79%. Timken Steel Corporation has a consensus target price of $19.75, suggesting a potential upside of 22.22%. Given AK Steel Holding Corporation’s stronger consensus rating and higher probable upside, equities research analysts plainly believe AK Steel Holding Corporation is more favorable than Timken Steel Corporation.

Institutional and Insider Ownership

76.7% of AK Steel Holding Corporation shares are owned by institutional investors. Comparatively, 75.2% of Timken Steel Corporation shares are owned by institutional investors. 1.8% of AK Steel Holding Corporation shares are owned by company insiders. Comparatively, 8.1% of Timken Steel Corporation shares are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.

Profitability

This table compares AK Steel Holding Corporation and Timken Steel Corporation’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
AK Steel Holding Corporation 1.16% -235.11% 5.15%
Timken Steel Corporation -10.34% -15.69% -9.06%

Risk and Volatility

AK Steel Holding Corporation has a beta of 2.89, suggesting that its share price is 189% more volatile than the S&P 500. Comparatively, Timken Steel Corporation has a beta of 2.25, suggesting that its share price is 125% more volatile than the S&P 500.

Valuation and Earnings

This table compares AK Steel Holding Corporation and Timken Steel Corporation’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
AK Steel Holding Corporation $5.90 billion 0.35 $670.60 million $0.26 25.00
Timken Steel Corporation $961.00 million 0.75 -$42.70 million ($2.26) -7.15

AK Steel Holding Corporation has higher revenue and earnings than Timken Steel Corporation. Timken Steel Corporation is trading at a lower price-to-earnings ratio than AK Steel Holding Corporation, indicating that it is currently the more affordable of the two stocks.

Summary

AK Steel Holding Corporation beats Timken Steel Corporation on 10 of the 13 factors compared between the two stocks.

AK Steel Holding Corporation Company Profile

AK Steel Holding Corporation is a producer of flat-rolled carbon, stainless and electrical steels, and tubular products through its subsidiary, AK Steel Corporation (AK Steel). The Company also operates blast furnaces and electric arc furnaces. As of December 31, 2016, its operations included eight steelmaking and finishing plants, two coke plants and two tube manufacturing plants across states, including Indiana, Kentucky, Michigan, Ohio, Pennsylvania and West Virginia, and a tube manufacturing plant in Mexico. These operations produce flat-rolled carbon, specialty stainless and electrical steels that it sells in sheet and strip form, and carbon and stainless steel that it finishes into welded steel tubing. It also produces metallurgical coal through its subsidiary, AK Coal Resources, Inc. In addition, the Company operates trading companies in Mexico and Europe that buy and sell steel and steel products and other materials.

Timken Steel Corporation Company Profile

TimkenSteel Corporation manufactures alloy steel, as well as carbon and micro-alloy steel. The Company’s portfolio includes special bar quality (SBQ) bars, seamless mechanical tubing and precision steel components. In addition, the Company supplies machining and thermal treatment services, as well as manage raw material recycling programs, which are used as a feeder system for its melt operations. The Company’s products include SBQ Steel and Seamless Mechanical Steel Tubing, and Value-added Precision Products and Services. Its focus is on alloy steel. The Company manufactures carbon, micro-alloy and alloy steel, sold as ingots, bars and tubes. In addition to its customized steels, the Company also manufactures custom-make precision components. Its products and services are used in a range of demanding applications in the market sectors, such as oil and gas, industrial equipment, mining and power generation.

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