As I wrote about here previously, Incitec Pivot Ltd (ASX: IPL) and Orica Ltd (ASX: ORI) are two chemicals and explosives manufacturers which share a lot in common. Both companies recently reported 2016 full-year results, revealing their operational prowess during a depressed mining cycle.

Investors seemingly cheered Orica’s report last Friday sending its shares surging over 8% on its announcement. Fast forwarding to Tuesday and Incitec Pivot’s results assumedly underwhelmed the market with the stock lacking direction and ending the day 1% lower.

As such, many investors may wonder which stock is the better buy today. Here’s what I think.

Incitec Pivot results

Incitec Pivot reported a better-than-expected 2016 full-year result, driven by cost cuts and productivity improvements. Statutory net profit after tax (NPAT) fell a staggering 68% as depressed commodity markets affected sales. Earnings per share (excluding material items) slid 26% to 17.3 cents per share, dragged lower by weaker contributions from Incitec Pivot’s flagship fertilisers business.

Nevertheless, the group paid a final dividend of 4.6 cents (unfranked) and implemented sustainable cost cutting measures to provide a lower operating base for 2017. Although net debt increased by $104.5 million over the year, Incitec Pivot’s balance sheet remains sound with an interest coverage 7.9x and net debt to earnings ratio of 2.1x.

In my opinion, Incitec Pivot’s solid balance sheet should allow it to regain earnings growth as its world-class ammonia plant in Louisiana USA, and a possible rebound in ammonia prices contribute to higher revenues in 2017. Therefore, despite the lacklustre results, Incitec Pivot remains a buy on my list given its promising prospects of headline growth.

Orica results

Orica reported statutory NPAT of $343 million for the year, up significantly from its prior year loss of $1.27 billion. Underlying earnings (EBITDA) declined $70 million to $908 million, caused by a decline in margins. Capital expenditure was also well managed, with the company spending less than guided at just $263 million for the year.

Pleasingly, CEO Alberto Calderon was optimistic for Orica’s underlying business in 2017, when presenting Orica’s results. Calderon cited early signs of an uptick in demand as an important precursor to a stronger 2017 financial year – though, only time will tell if this eventuates.

Nonetheless, the market seemingly approves of Calderon’s optimism, pushing Orica’s share price almost 6% higher since the announcement. However, near-term headwinds of input price resets cast a cloud over growth prospects, which makes it priced for perfection in my mind.

Foolish takeaway

With Orica currently trading at a price-earnings of 17.8x (at Tuesday’s close), I calculate it trades in-line with the underlying price-earnings of Incitec Pivot (at 17.3x, after excluding material items). Accordingly, given Incitec Pivot stands to benefit from its Louisiana plant coming fully online in 2017, I believe it has more upside at current prices and thus is the better buy today.

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Motley Fool contributor Rachit Dudhwala has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.