Domtar (NYSE: UFS) and Resolute Forest Products (NYSE:RFP) are both basic materials companies, but which is the better investment? We will compare the two companies based on the strength of their institutional ownership, valuation, earnings, risk, dividends, profitability and analyst recommendations.
Volatility & Risk
Domtar has a beta of 1.63, meaning that its share price is 63% more volatile than the S&P 500. Comparatively, Resolute Forest Products has a beta of 1.71, meaning that its share price is 71% more volatile than the S&P 500.
94.5% of Domtar shares are owned by institutional investors. Comparatively, 88.3% of Resolute Forest Products shares are owned by institutional investors. 1.0% of Domtar shares are owned by company insiders. Comparatively, 1.1% of Resolute Forest Products shares are owned 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.
Earnings & Valuation
This table compares Domtar and Resolute Forest Products’ revenue, earnings per share and valuation.
|Gross Revenue||Price/Sales Ratio||Net Income||Earnings Per Share||Price/Earnings Ratio|
|Domtar||$5.16 billion||0.53||-$258.00 million||($3.38)||-12.86|
|Resolute Forest Products||$3.51 billion||0.22||-$84.00 million||($0.94)||-9.10|
Resolute Forest Products has lower revenue, but higher earnings than Domtar. Domtar is trading at a lower price-to-earnings ratio than Resolute Forest Products, indicating that it is currently the more affordable of the two stocks.
Domtar pays an annual dividend of $1.66 per share and has a dividend yield of 3.8%. Resolute Forest Products does not pay a dividend. Domtar pays out -49.1% of its earnings in the form of a dividend. Domtar has increased its dividend for 8 consecutive years.
This table compares Domtar and Resolute Forest Products’ net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
|Resolute Forest Products||-2.39%||0.74%||0.28%|
This is a summary of current ratings for Domtar and Resolute Forest Products, as reported by MarketBeat.com.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
|Resolute Forest Products||1||3||0||0||1.75|
Domtar currently has a consensus target price of $43.27, suggesting a potential downside of 0.43%. Resolute Forest Products has a consensus target price of $9.08, suggesting a potential upside of 6.24%. Given Resolute Forest Products’ higher possible upside, analysts clearly believe Resolute Forest Products is more favorable than Domtar.
Domtar beats Resolute Forest Products on 10 of the 17 factors compared between the two stocks.
Domtar Corporation designs, manufactures, markets and distributes a range of fiber-based products, including communication papers, specialty and packaging papers and absorbent hygiene products. The Company segments include Pulp and Paper and Personal Care. The Pulp and Paper segment consists of the design, manufacturing, marketing and distribution of communication, specialty and packaging papers, as well as softwood, fluff and hardwood market pulp. The Personal Care segment consists of the design, manufacturing, marketing and distribution of absorbent hygiene products. The Company is a marketer of uncoated freesheet paper in North America serving a range of customers, including merchants, retail outlets, stationers, printers, publishers, converters and end users. It is also a marketer and producer of a line of incontinence care products, as well as infant diapers. It has a network of wood fiber converting assets that produce paper grade, fluff and specialty pulp.
About Resolute Forest Products
Resolute Forest Products Inc. operates in the forest products industry. It offers a range of forest products, including market pulp, tissue, wood products, newsprint and specialty papers. As of December 31, 2016, it owned or operated over 40 pulp, paper, tissue and wood products facilities in the United States and Canada. Its segments include market pulp, tissue, wood products, newsprint and specialty papers. As of December 31, 2016, it produced market pulp at seven facilities in North America, with total capacity of approximately 1.7 million metric tons. As of December 31, 2016, it produced tissue products at two facilities in North America, both located in Florida. As of December 31, 2016, it operated 16 sawmills in Canada that produces construction-grade lumber sold in North America, on the east coast. As of December 31, 2016, it produced newsprint at 10 facilities in North America. As of December 31, 2016, it produced specialty papers at five facilities in North America.
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