Analyzing LSC Communications (LKSD) and ARC Document Solutions (ARC)

LSC Communications (NYSE: LKSD) and ARC Document Solutions (NYSE:ARC) are both small-cap industrial products companies, but which is the better stock? We will compare the two companies based on the strength of their earnings, risk, valuation, profitability, institutional ownership, dividends and analyst recommendations.

Institutional and Insider Ownership

84.4% of LSC Communications shares are owned by institutional investors. Comparatively, 70.5% of ARC Document Solutions shares are owned by institutional investors. 2.5% of LSC Communications shares are owned by company insiders. Comparatively, 14.9% of ARC Document Solutions shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock is poised for long-term growth.

Profitability

This table compares LSC Communications and ARC Document Solutions’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
LSC Communications 0.28% 24.72% 3.35%
ARC Document Solutions -1.70% 5.35% 2.27%

Dividends

LSC Communications pays an annual dividend of $1.00 per share and has a dividend yield of 6.2%. ARC Document Solutions does not pay a dividend. LSC Communications pays out 344.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Analyst Ratings

This is a summary of recent ratings and recommmendations for LSC Communications and ARC Document Solutions, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
LSC Communications 0 4 0 0 2.00
ARC Document Solutions 0 2 0 1 2.67

LSC Communications currently has a consensus target price of $24.00, suggesting a potential upside of 49.63%. ARC Document Solutions has a consensus target price of $4.63, suggesting a potential upside of 77.88%. Given ARC Document Solutions’ stronger consensus rating and higher probable upside, analysts clearly believe ARC Document Solutions is more favorable than LSC Communications.

Risk & Volatility

LSC Communications has a beta of 5.95, meaning that its stock price is 495% more volatile than the S&P 500. Comparatively, ARC Document Solutions has a beta of 2.29, meaning that its stock price is 129% more volatile than the S&P 500.

Valuation and Earnings

This table compares LSC Communications and ARC Document Solutions’ revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
LSC Communications $3.65 billion 0.15 $106.00 million $0.29 55.31
ARC Document Solutions $406.32 million 0.30 -$47.86 million ($0.14) -18.57

LSC Communications has higher revenue and earnings than ARC Document Solutions. ARC Document Solutions is trading at a lower price-to-earnings ratio than LSC Communications, indicating that it is currently the more affordable of the two stocks.

Summary

LSC Communications beats ARC Document Solutions on 9 of the 16 factors compared between the two stocks.

LSC Communications Company Profile

LSC Communications, Inc. focuses on traditional and digital print, print-related services and office products. The Company’s segments are Print and Office Products. The Company, through its Print segment, provides a range of print product offerings, which include magazines, catalogs, retail inserts, books and directories. In addition to printed products, the Company also provides a number of print-related services, such as supply chain management, mail services, e-book formatting and distribution services. Its Print segment services over 3,000 customers, including publishers of magazines, books and directories, online retailers, catalogers, mass merchandisers and contract stationers. In its Office Products segment, the Company manufactures and sells a range of branded and private label products, primarily within the core categories, including filing products; note-taking products; binder products; tax and stock forms, and envelopes.

ARC Document Solutions Company Profile

ARC Document Solutions, Inc. (ARC) is a document solutions provider for the architectural, engineering and construction (AEC) industry. The Company also provides document solutions to businesses of various types. ARC’s offerings include managed print services (MPS), offsite services, archive and information management (AIM), specialized color printing, Web-based document management applications, digital shipping/managed file transfer, and equipment and supplies sales. MPS is an onsite service where it installs a complete document solution platform in its customers’ offices and project sites. Its Offsite Services offering operates over 180 offsite service centers. AIM enables its customers to store information and intellectual property in a cloud-based and searchable digital archive. The Specialized Color Printing offering is focused on color printing, finishing and assembly of graphic materials. Its Web-Based Document Management Applications develop and offer tools to its customers.

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