Stora Enso (OTCMKTS: SEOAY) and Domtar Paper (NYSE:UFS) are both basic materials companies, but which is the superior investment? We will compare the two businesses based on the strength of their dividends, analyst recommendations, valuation, institutional ownership, earnings, profitability and risk.
Risk & Volatility
Stora Enso has a beta of 1.32, indicating that its stock price is 32% more volatile than the S&P 500. Comparatively, Domtar Paper has a beta of 1.62, indicating that its stock price is 62% more volatile than the S&P 500.
Stora Enso pays an annual dividend of $0.40 per share and has a dividend yield of 2.0%. Domtar Paper pays an annual dividend of $1.74 per share and has a dividend yield of 3.9%. Stora Enso pays out 39.6% of its earnings in the form of a dividend. Domtar Paper pays out 66.9% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Domtar Paper has raised its dividend for 8 consecutive years. Domtar Paper is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.
Earnings and Valuation
This table compares Stora Enso and Domtar Paper’s revenue, earnings per share and valuation.
|Gross Revenue||Price/Sales Ratio||Net Income||Earnings Per Share||Price/Earnings Ratio|
|Stora Enso||$11.35 billion||1.36||$693.59 million||$1.01||19.44|
|Domtar Paper||$5.16 billion||0.55||-$258.00 million||$2.60||17.26|
Stora Enso has higher revenue and earnings than Domtar Paper. Domtar Paper is trading at a lower price-to-earnings ratio than Stora Enso, indicating that it is currently the more affordable of the two stocks.
This is a breakdown of current ratings and price targets for Stora Enso and Domtar Paper, as reported by MarketBeat.com.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
Domtar Paper has a consensus price target of $43.45, suggesting a potential downside of 3.18%. Given Domtar Paper’s higher possible upside, analysts clearly believe Domtar Paper is more favorable than Stora Enso.
Institutional and Insider Ownership
0.1% of Stora Enso shares are held by institutional investors. Comparatively, 94.5% of Domtar Paper shares are held by institutional investors. 8.1% of Stora Enso shares are held by insiders. Comparatively, 1.0% of Domtar Paper shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company will outperform the market over the long term.
This table compares Stora Enso and Domtar Paper’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
Stora Enso beats Domtar Paper on 9 of the 16 factors compared between the two stocks.
About Stora Enso
Stora Enso Oyj provides renewable solutions for the packaging, biomaterials, wooden constructions, and paper industries worldwide. The company operates through five divisions: Consumer Board, Packaging Solutions, Biomaterials, Wood Products, and Paper. The Consumer Board division develops virgin fiber carton board used for packaging for liquid, food, pharmaceutical, and luxury goods. The Packaging Solutions division provides fiber-based board materials and corrugated packaging products and services designed for various applications to converters, brand owners, and retailers. The Biomaterials division offers various pulp grades for paper, board, tissue, textile, and hygiene product producers. The Wood Products division provides wood-based solutions for building and housing, such as massive wood elements, wood components, and sawn goods; and pellets for sustainable heating primarily to merchants and retailers, industrial integrators, and construction companies. The Paper division provides paper solutions for print media and office use, including papers made from virgin wood and recycled fibers. This division serves publishers, retailers, printing houses, merchants, converters, and office suppliers. Stora Enso Oyj is headquartered in Helsinki, Finland.
About Domtar Paper
Domtar Corporation designs, manufactures, markets, and distributes various communication papers, specialty and packaging papers, and absorbent hygiene products in the United States, Canada, Europe, Asia, and internationally. It operates in two segments, Pulp and Paper, and Personal Care. The company offers business papers, including copy and electronic imaging papers for use with inkjet and laser printers, photocopiers, and plain-paper fax machines, as well as computer papers, preprinted forms, and digital papers for office and home use. It also provides commercial printing and publishing papers, such as offset papers and opaques for sheet and roll fed offset presses; publishing papers comprising tradebook and lightweight uncoated papers for publishing textbooks, dictionaries, catalogs, magazines, hard cover novels, and financial documents; and base papers that are converted into envelopes, tablets, business forms, and data processing/computer forms. In addition, the company offers papers for thermal and flexible packaging, food and medical packaging, medical gowns and drapes, sandpaper backing, carbonless printing, label, and other coating and laminating applications; and papers for industrial and specialty applications that include carrier and treated papers, security papers, and specialized printing and converting applications. Further, it provides softwood, fluff, and hardwood Kraft products for various end products. Additionally, the company offers absorbent hygiene products, which comprise adult incontinence products under the Attends, IncoPack, Indasec, and Reassure brand; and branded and private label briefs, protective underwear, underpads, pads, and washcloths, as well as baby diapers, youth pants, and infant training pants for healthcare, retail, and direct-to-consumer channels. It serves merchants, retail outlets, stationers, printers, publishers, converters, and end-users. The company was incorporated in 2006 and is based in Fort Mill, South Carolina.
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