Horsehead (ZINCQ) and Arch Coal (ARCH) Critical Review

Horsehead (OTCMKTS: ZINCQ) and Arch Coal (NYSE:ARCH) are both small-cap basic materials companies, but which is the better investment? We will compare the two businesses based on the strength of their institutional ownership, dividends, valuation, risk, profitability, earnings and analyst recommendations.

Analyst Recommendations

This is a breakdown of current ratings for Horsehead and Arch Coal, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Horsehead 0 0 0 0 N/A
Arch Coal 0 1 8 0 2.89

Arch Coal has a consensus target price of $93.00, indicating a potential upside of 11.78%. Given Arch Coal’s higher probable upside, analysts plainly believe Arch Coal is more favorable than Horsehead.

Profitability

This table compares Horsehead and Arch Coal’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Horsehead -35.52% N/A -37.34%
Arch Coal N/A N/A N/A

Dividends

Arch Coal pays an annual dividend of $1.40 per share and has a dividend yield of 1.7%. Horsehead does not pay a dividend.

Institutional and Insider Ownership

37.0% of Arch Coal shares are held by institutional investors. 1.3% of Arch Coal shares are held by 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 Horsehead and Arch Coal’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Horsehead N/A N/A N/A ($13.24) 0.00
Arch Coal $1.97 billion 0.92 $1.28 billion N/A N/A

Arch Coal has higher revenue and earnings than Horsehead.

Summary

Arch Coal beats Horsehead on 8 of the 8 factors compared between the two stocks.

About Horsehead

Horsehead Holding Corp. is a producer of zinc and nickel-based products sold primarily to customers throughout the United States and Canada. The Company is also a recycler of electric arc furnace (EAF) dust in the United States and a recycler of hazardous and non-hazardous waste for the specialty steel industry. It operates in three segments, which include Horsehead, Zochem and INMETCO. Horsehead is engaged in producing zinc metal and recycling of EAF dust. Zochem is engaged in producing zinc oxide in North America. INMETCO is engaged in recycling of nickel-bearing waste generated by the stainless and specialty steel producers, and recycling of nickel-cadmium and other types of batteries in North America. The Company’s products are used in a range of applications, including in the galvanizing of sheet and fabricated steel products, as components in rubber tires, alkaline batteries, paint, chemicals and pharmaceuticals and as a remelt alloy in the production of stainless steel.

About Arch Coal

Arch Coal, Inc. is a coal producer. The Company is engaged in the production of thermal and metallurgical coal from surface and underground mines located throughout the United States, for sale to utility, industrial and steel producers both in the United States and around the world. The Company operates mining complexes in West Virginia, Kentucky, Maryland, Virginia, Illinois, Wyoming and Colorado. The Company’s segments include the Powder River Basin and Appalachia. The Powder River Basin segment includes operations in Wyoming. The Appalachia segment includes operations in West Virginia, Kentucky, Maryland and Virginia. The Company also sells coal from operations in Colorado and Illinois. Powder River Basin consists of Black Thunder and Coal Creek mines. The Company’s mines in Appalachia include Coal-Mac, Lone Mountain, Mountain Laurel, Beckley, Vindex, Sentinel and Leer. The Company operates, or contracts out the operation of approximately 10 active mines in the United States.

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