Critical Review: Pool (POOL) vs. Schnitzer Steel Industries (SCHN)

Pool (NASDAQ: POOL) and Schnitzer Steel Industries (NASDAQ:SCHN) are both consumer discretionary companies, but which is the better investment? We will compare the two businesses based on the strength of their profitability, valuation, institutional ownership, risk, dividends, earnings and analyst recommendations.

Dividends

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Pool pays an annual dividend of $1.48 per share and has a dividend yield of 1.0%. Schnitzer Steel Industries pays an annual dividend of $0.75 per share and has a dividend yield of 2.5%. Pool pays out 37.1% of its earnings in the form of a dividend. Schnitzer Steel Industries pays out 49.0% 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.

Earnings and Valuation

This table compares Pool and Schnitzer Steel Industries’ revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Pool $2.79 billion 2.06 $191.63 million $3.99 35.50
Schnitzer Steel Industries $1.69 billion 0.48 $44.51 million $1.53 19.64

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

Insider & Institutional Ownership

96.2% of Pool shares are held by institutional investors. Comparatively, 91.9% of Schnitzer Steel Industries shares are held by institutional investors. 6.0% of Pool shares are held by company insiders. Comparatively, 3.8% of Schnitzer Steel Industries shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Profitability

This table compares Pool and Schnitzer Steel Industries’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Pool 7.10% 74.42% 15.04%
Schnitzer Steel Industries 4.68% 14.28% 8.05%

Analyst Ratings

This is a summary of current ratings and recommmendations for Pool and Schnitzer Steel Industries, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Pool 0 1 3 0 2.75
Schnitzer Steel Industries 0 3 1 0 2.25

Pool presently has a consensus price target of $149.67, indicating a potential upside of 5.65%. Schnitzer Steel Industries has a consensus price target of $32.33, indicating a potential upside of 7.60%. Given Schnitzer Steel Industries’ higher possible upside, analysts clearly believe Schnitzer Steel Industries is more favorable than Pool.

Volatility and Risk

Pool has a beta of 0.82, indicating that its share price is 18% less volatile than the S&P 500. Comparatively, Schnitzer Steel Industries has a beta of 1.45, indicating that its share price is 45% more volatile than the S&P 500.

Summary

Pool beats Schnitzer Steel Industries on 13 of the 16 factors compared between the two stocks.

About Pool

Pool Corporation distributes swimming pool supplies, equipment, and related leisure products in North America, Europe, South America, and Australia. The company offers maintenance products, including chemicals, supplies, and pool accessories; repair and replacement parts for pool equipment, such as cleaners, filters, heaters, pumps, and lights; packaged pool kits comprising walls, liners, braces, and coping for in-ground and above-ground pools; pool equipment and components for new pool construction and the remodeling of existing pools; and irrigation and landscape products consisting of irrigation system components, and professional lawn care equipment and supplies. It also provides building materials, such as concrete, plumbing and electrical components, functional and decorative pool surfaces, decking materials, tiles, hardscapes, and natural stones for use in pool installations and remodeling; and commercial products, such as ASME heaters, safety equipment, and commercial pumps and filters. In addition, the company offers discretionary recreational and related outdoor lifestyle products that enhance consumers' use and enjoyment of outdoor living spaces, such as spas, grills, and components for outdoor kitchens. It serves swimming pool remodelers and builders; specialty retailers that sell swimming pool supplies; swimming pool repair and service businesses; irrigation construction and landscape maintenance contractors; and golf course and other commercial customers. As of December 31, 2017, the company operated 351 sales centers. Pool Corporation was founded in 1993 and is headquartered in Covington, Louisiana.

About Schnitzer Steel Industries

Schnitzer Steel Industries, Inc. recycles ferrous and nonferrous scrap metals; and manufactures finished steel products worldwide. It operates through two segments, Auto and Metals Recycling (AMR); and Cascade Steel and Scrap (CSS). The AMR segment buys, collects, processes, recycles, sells, and brokers scrap metals, as well as processes mixed and large pieces of scrap metal into smaller pieces by crushing, torching, shearing, shredding, and sorting. This segment offers ferrous scrap metal, a feedstock used in the production of finished steel products; and nonferrous products, including aluminum, copper, stainless steel, nickel, brass, titanium, lead, high temperature alloys, and joint products. It sells ferrous and nonferrous recycled metal products to steel mills, foundries, and smelters. This segment also procures salvaged vehicles and sells serviceable used auto parts from these vehicles through its 53 self-service auto parts stores in the United States and Western Canada, as well as sells auto bodies and parts containing ferrous and nonferrous materials, such as engines, transmissions, and alternators to wholesalers. The CSS segment produces various finished steel products using recycled metal and other raw materials. It offers semi-finished goods, which include billets; and finished goods consisting of rebar, coiled rebar, wire rods, merchant bars, and other specialty products. This segment serves steel service centers, construction industry subcontractors, steel fabricators, wire drawers, and farm and wood products suppliers. Schnitzer Steel Industries, Inc. was founded in 1906 and is headquartered in Portland, Oregon.