Contrasting Mercer International (NASDAQ:MERC) & Sylvamo (NYSE:SLVM)

Mercer International (NASDAQ:MERC) and Sylvamo (NYSE:SLVM) are both small-cap basic materials companies, but which is the better business? We will compare the two businesses based on the strength of their earnings, analyst recommendations, dividends, risk, valuation, profitability and institutional ownership.

Profitability

This table compares Mercer International and Sylvamo’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Mercer International	-5.60%	-23.88%	-4.61%
Sylvamo	6.11%	23.99%	8.14%

Volatility and Risk

Mercer International has a beta of 1.05, meaning that its share price is 5% more volatile than the S&P 500. Comparatively, Sylvamo has a beta of 1, meaning that its share price has a similar volatility profile to the S&P 500.

Insider and Institutional Ownership

85.8% of Mercer International shares are held by institutional investors. Comparatively, 91.2% of Sylvamo shares are held by institutional investors. 1.0% of Mercer International shares are held by company insiders. Comparatively, 0.7% of Sylvamo shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company is poised for long-term growth.

Earnings and Valuation

This table compares Mercer International and Sylvamo”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Mercer International	$2.04 billion	0.10	-$85.14 million	($1.63)	-1.96
Sylvamo	$3.77 billion	0.48	$302.00 million	$5.23	8.54

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

Analyst Ratings

This is a summary of current ratings and recommmendations for Mercer International and Sylvamo, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Mercer International	0	4	0	0	2.00
Sylvamo	2	1	1	0	1.75

Mercer International presently has a consensus price target of $4.25, indicating a potential upside of 32.81%. Sylvamo has a consensus price target of $71.00, indicating a potential upside of 59.02%. Given Sylvamo’s higher possible upside, analysts plainly believe Sylvamo is more favorable than Mercer International.

Dividends

Mercer International pays an annual dividend of $0.30 per share and has a dividend yield of 9.4%. Sylvamo pays an annual dividend of $1.80 per share and has a dividend yield of 4.0%. Mercer International pays out -18.4% of its earnings in the form of a dividend. Sylvamo pays out 34.4% 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. Sylvamo has raised its dividend for 3 consecutive years. Mercer International is clearly the better dividend stock, given its higher yield and lower payout ratio.

Summary

Sylvamo beats Mercer International on 12 of the 17 factors compared between the two stocks.

About Mercer International

Mercer International Inc., together with its subsidiaries, manufactures and sells northern bleached softwood kraft (NBSK) and northern bleached hardwood kraft (NBHK) pulp worldwide. The company operates through two segments, Pulp and Solid Wood. It manufactures, sells, and distributes pulp, electricity, and chemicals through pulp mills. The company also manufactures, distributes, and sells lumber, cross-laminated timber, finger joint lumber, glue-laminated timber, wood pallets, electricity, biofuels, and wood residuals. In addition, it generates and sells green energy produced from biomass cogeneration power plant to third party. Further, it produces and sells NBSK pulp manufactured from softwood; green energy using carbon-neutral biofuels, such as black liquor and wood waste; tall oil from black liquor for use as a chemical additive and green energy source; bio extractives and biomaterials, including lignin, turpentine, cellulose filaments, and sandalwood oil; and biofuels; as well as provides transportation and logistics services. The company sells its pulp to pulp markets, integrated paper and paperboard manufacturers; and lumber products to distributors, construction firms, secondary manufacturers, retail yards, and home centers. Mercer International Inc. was founded in 1968 and is headquartered in Vancouver, Canada.

About Sylvamo

Sylvamo Corporation produces and markets uncoated freesheet for cutsize, offset paper, and pulp in Latin America, Europe, and North America. The company operates through Europe, Latin America, and North America segments. The Europe segment offers copy, tinted, and colored laser printing paper under REY Adagio and Pro-Design brands; and graphic and high-speed inkjet printing papers under the brand Jetstar; as well as produces uncoated freesheet papers. The Latin America segment focuses on uncoated freesheet paper under Chamex, Chamequinho and Chambril brands, as well as produces HP papers. This segment also operates integrated mills and non-integrated mills. The North America segment offers imaging, commercial printing, and converting papers, as well as uncoated papers under Hammermill, Springhill, Williamsburg, Accent, DRM and Postmark brand names. It distributes its products through a variety of channels, including retail merchants, e-commerce, agents, resellers, and paper distributors. The company was founded in 1898 and is headquartered in Memphis, Tennessee.