Dow vs. LyondellBasell Industries: Which Materials Stock Is a Better Buy in 2026?

As the global economy adjusts to shifting demand, many investors look to materials for stability. Choosing between Dow Holdings Inc (NYSE:DOW) and LyondellBasell Industries N.V. (NYSE:LYB) requires comparing two industry heavyweights with distinct paths.

Both companies are leaders in the chemicals industry, yet they offer different risk profiles and growth strategies. Dow focuses on high-volume materials science for construction and packaging, while LyondellBasell is a powerhouse in polymers and polyolefin technologies. We compare their financials and valuations to help you decide which stock fits your strategy.

The case for Dow Holdings

Dow produces materials for the agriculture, construction, and electronics markets. The business serves a global customer base through its 91 manufacturing sites located in 29 countries. It does not depend on any single customer for a significant share of its sales, reducing its reliance on individual corporate clients. The company leverages strategic joint ventures like EQUATE and Sadara, both major Middle East petrochemical firms, to reach international markets. These markets are essential components of the broader materials and metal stocks landscape.

In FY 2025, revenue slipped to $40 billion, down from nearly $43.0 billion the previous year. This roughly 7.0% decline in revenue contributed to a net loss of $2.6 billion for the period. This figure reflects a significant swing from the $1.1 billion net income of the prior fiscal year.

The company's balance sheet as of its December 2025 report showed a debt-to-equity ratio of 1.2x. This ratio measures total debt against shareholder equity, indicating that Dow uses a moderate amount of debt to finance its operations. Free cash flow for the period was negative $1.4 billion, which represents cash left over after paying for capital investments.

The case for LyondellBasell

LyondellBasell is a global leader in polymers and polyolefin technologies used in transportation and food safety. Similar to its peer, no single customer accounted for 10% or more of its total revenues in 2025, providing a diversified revenue base. The company relies on key joint ventures, such as the Louisiana Integrated PolyEthylene partnership with Sasol Ltd (NYSE:SSL), for production capacity. It also operates manufacturing sites in Saudi Arabia, Indonesia, and Thailand to serve its global markets. These operations support a wide range of industries that rely on advanced chemical production.

During FY 2025, revenue was $30.2 billion, representing a significant decline of roughly 25% from the prior year. This drop in sales resulted in a net loss of $743 million for the fiscal year. This result followed a period of higher profitability and higher revenue in the preceding two years.

As of its December 2025 balance sheet, the debt-to-equity ratio was 1.6x. This value, which compares total debt to shareholder equity, indicates that the company uses more debt relative to its equity than some of its primary competitors. Free cash flow was positive, at $384 million, representing the actual cash generated after accounting for capital expenditures like equipment and plant upgrades.

Risk profile comparison

Dow faces significant legal exposure, including ongoing class actions and asbestos-related liabilities arising from its Union Carbide subsidiary. Recently, the company has faced a 2026 chlorpyrifos-exposure lawsuit and environmental litigation over plastic pollution. Additionally, its Path2Zero decarbonization strategy carries execution risks, as failure to meet climate targets or secure renewable infrastructure could impact its financial performance. Earnings also remain highly exposed to global chemical supply imbalances and volatility in feedstock prices.

LyondellBasell is highly sensitive to the supply-demand cycles of the chemical industry, which can cause large swings in earnings. Its profitability depends heavily on crude oil and natural gas prices, making it vulnerable to energy market volatility. The company also faces technical risks with large projects like its MoReTec plastics recycling facility, while competitors like Chevron (NYSE:CVX) navigate similar regulatory pressures regarding greenhouse gas emissions. Stringent environmental regulations governing waste management and plastics recyclability present ongoing legal risks.

Valuation comparison

LyondellBasell trades at a lower Forward P/E than Dow, while Dow has a similar P/S ratio. These metrics compare price to future earnings estimates and revenue.

Sector benchmark uses the SPDR XLB sector ETF.
Valuation metrics sourced from Financial Modeling Prep (FMP) and may differ from other data providers.

Which stock would I buy in 2026?

For Dow, there has been weakness in demand across many of its core businesses, and lower prices, coupled with high costs, have eroded margins. But for this chemical giant, the war with Iran brings benefits. Dow has been affected in recent quarters by oversupply. The on-again, off-again closure of the Strait of Hormuz is an opportunity for Dow to capitalize on supply pressures stemming from supply-chain disruptions, which will likely take a year or more to undo even if the conflict is resolved soon.

That has 2026 looking better for Dow, with sales seen rising by analysts to $44.7 billion, about a 10.5% rise. Net income should reappear on the ledger, with $1.8 billion projected by Wall Street.

LyondellBasell is in much the same boat as Dow. Many of its businesses have experienced weakness. But the Iran war provides an opportunity for the chemical giant to fill demand in Europe and elsewhere that would normally have been filled from the Middle East and other regional plants. Some 70% of global polypropylene supply is sourced through the Strait of Hormuz (both the product itself and its feedstocks). That should allow LyondellBasell to utilize U.S. production capacity that has lain idle in recent years

Those dynamics should get LyondellBasell back to profitability in 2026, with Wall Street projecting net income of $3.25 billion from sales of $34.5 billion, which would be 14% higher than in 2025.

Both Dow and LyondellBasell may be overlooked by investors at times, but their products are essential to the global economy. LyondellBasell’s more affordable P/E and P/S ratios make it the choice for investors looking for materials exposure in 2026.

Brendan Coffey has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Chevron. The Motley Fool has a disclosure policy.