Analyzing Potlatch Corporation (PCH) and Rayonier (RYN)

Rayonier (NYSE: RYN) and Potlatch Corporation (NASDAQ:PCH) are both construction companies, but which is the better stock? We will compare the two businesses based on the strength of their institutional ownership, analyst recommendations, profitabiliy, earnings, valuation, risk and dividends.

Profitability

This table compares Rayonier and Potlatch Corporation’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Rayonier 27.54% 4.10% 2.26%
Potlatch Corporation 4.46% 42.10% 6.95%

Institutional and Insider Ownership

82.6% of Rayonier shares are held by institutional investors. Comparatively, 83.8% of Potlatch Corporation shares are held by institutional investors. 0.6% of Rayonier shares are held by insiders. Comparatively, 1.5% of Potlatch Corporation shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Volatility and Risk

Rayonier has a beta of 0.39, meaning that its stock price is 61% less volatile than the S&P 500. Comparatively, Potlatch Corporation has a beta of 1.46, meaning that its stock price is 46% more volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of recent ratings and target prices for Rayonier and Potlatch Corporation, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Rayonier 0 3 3 0 2.50
Potlatch Corporation 2 5 0 0 1.71

Rayonier currently has a consensus target price of $29.25, indicating a potential downside of 0.27%. Potlatch Corporation has a consensus target price of $43.25, indicating a potential downside of 9.42%. Given Rayonier’s stronger consensus rating and higher probable upside, research analysts plainly believe Rayonier is more favorable than Potlatch Corporation.

Dividends

Rayonier pays an annual dividend of $1.00 per share and has a dividend yield of 3.4%. Potlatch Corporation pays an annual dividend of $1.50 per share and has a dividend yield of 3.1%. Rayonier pays out 53.5% of its earnings in the form of a dividend. Potlatch Corporation pays out 223.9% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Rayonier is clearly the better dividend stock, given its higher yield and lower payout ratio.

Valuation & Earnings

This table compares Rayonier and Potlatch Corporation’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Rayonier $839.95 million 4.32 $398.43 million $1.87 15.68
Potlatch Corporation $620.88 million 3.12 $133.21 million $0.67 71.27

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

Summary

Rayonier beats Potlatch Corporation on 11 of the 16 factors compared between the two stocks.

Rayonier Company Profile

Rayonier Inc. is a timberland real estate investment trust with assets located in some of the timber growing regions in the United States and New Zealand. The Company operates through five segments: Southern Timber, Pacific Northwest Timber, New Zealand Timber, Real Estate and Trading. The Southern Timber, Pacific Northwest Timber and New Zealand Timber segments reflect all activities related to the harvesting of timber and other activities, such as recreational leases, within each respective geography. Its New Zealand Timber segment also reflects land sales that occur within its New Zealand portfolio. Its Real Estate segment reflects the United States land sales. Its Trading segment reflects the log trading activities that support its New Zealand operations. It owned, leased or managed approximately 2.7 million acres of timberlands, as of December 31, 2016. It is engaged in the trading of logs from New Zealand and Australia to Pacific Rim markets.

Potlatch Corporation Company Profile

Potlatch Corporation is a real estate investment trust (REIT), which is primarily engaged in activities associated with timberland management, including the sale of timber, management of timberlands, and purchase and sale of timberlands. The Company is also engaged in the manufacture and sale of wood products. It operates through three segments: Resource, Wood Products and Real Estate. Its primary objectives include using its timberland investments to generate income and maximizing the long-term value of its assets. Its Resource segment manages its timberlands. Its Wood Products segment manufactures and markets lumber, plywood and residual products at mills located in Arkansas, Idaho, Michigan and Minnesota. The activities of its Real Estate segment consist primarily of the sale of non-core timberlands in the categories of higher and better use (HBU), rural recreational real estate and non-strategic properties.

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