Analyzing Domtar Paper (UFS) and Resolute Forest Products (RFP)

Resolute Forest Products (NYSE: RFP) and Domtar Paper (NYSE:UFS) are both basic materials companies, but which is the superior business? We will contrast the two businesses based on the strength of their analyst recommendations, profitability, earnings, institutional ownership, valuation, dividends and risk.

Volatility and Risk

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Resolute Forest Products has a beta of 1.57, indicating that its stock price is 57% 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.

Analyst Recommendations

This is a summary of current recommendations for Resolute Forest Products and Domtar Paper, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Resolute Forest Products 1 3 0 0 1.75
Domtar Paper 3 8 4 0 2.07

Resolute Forest Products presently has a consensus price target of $9.08, indicating a potential downside of 3.37%. Domtar Paper has a consensus price target of $43.45, indicating a potential upside of 1.22%. Given Domtar Paper’s stronger consensus rating and higher possible upside, analysts clearly believe Domtar Paper is more favorable than Resolute Forest Products.

Valuation & Earnings

This table compares Resolute Forest Products and Domtar Paper’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Resolute Forest Products $3.51 billion 0.24 -$84.00 million N/A N/A
Domtar Paper $5.16 billion 0.52 -$258.00 million $2.60 16.51

Resolute Forest Products has higher earnings, but lower revenue than Domtar Paper.

Insider and Institutional Ownership

88.3% of Resolute Forest Products shares are held by institutional investors. Comparatively, 94.5% of Domtar Paper shares are held by institutional investors. 1.1% of Resolute Forest Products 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 is poised for long-term growth.

Dividends

Domtar Paper pays an annual dividend of $1.74 per share and has a dividend yield of 4.1%. Resolute Forest Products does not pay a dividend. Domtar Paper pays out 66.9% of its earnings in the form of a dividend. Domtar Paper has raised its dividend for 8 consecutive years.

Profitability

This table compares Resolute Forest Products and Domtar Paper’s 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%
Domtar Paper -4.11% 6.02% 2.93%

Summary

Domtar Paper beats Resolute Forest Products on 11 of the 16 factors compared between the two stocks.

Resolute Forest Products Company Profile

Resolute Forest Products Inc. operates in the forest products industry in the United States, Canada, Mexico, and internationally. The company operates in five segments: Market Pulp, Tissue, Wood Products, Newsprint, and Specialty Papers. The Market Pulp segment offers market, recycled bleached Kraft, and bleached hardwood Kraft pulp used to make a range of consumer products, including tissue, packaging, specialty paper products, diapers, and other absorbent products. The Tissue segment provides tissue products, such as recycled and virgin paper products for the away-from-home and at-home markets; and sells roll products. The Wood Products segment produces construction-grade and spruce-pine-fir lumber products, bed frame components, finger joints, and furring strips, as well as I-joists. The Newsprint segment offers newsprint and sells to newspaper publishers worldwide, as well as to commercial printers in North America for a range of uses comprising inserts and flyers. The Specialty Papers segment offers various specialty papers, including uncoated mechanical papers, such as supercalendered and white papers, as well as coated mechanical papers and uncoated freesheet papers. Its specialty papers are used in books, retail inserts, direct mail, coupons, magazines, catalogs, bags, and other commercial printing applications. This segment sells specialty papers to commercial printers, direct mailers, publishers, catalogers, and retailers. The company also produces electricity at seven cogeneration facilities and seven hydroelectric dams. Resolute Forest Products Inc. is headquartered in Montréal, Canada.

Domtar Paper Company Profile

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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