Mercer International (NASDAQ:MERC – Get Free Report) and International Paper (NYSE:IP – Get Free Report) are both basic materials companies, but which is the superior investment? We will compare the two businesses based on the strength of their institutional ownership, risk, analyst recommendations, dividends, profitability, valuation and earnings.
Insider & Institutional Ownership
85.8% of Mercer International shares are held by institutional investors. Comparatively, 81.9% of International Paper shares are held by institutional investors. 1.0% of Mercer International shares are held by insiders. Comparatively, 0.4% of International Paper shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock is poised for long-term growth.
Dividends
Mercer International pays an annual dividend of $0.30 per share and has a dividend yield of 14.8%. International Paper pays an annual dividend of $1.85 per share and has a dividend yield of 5.0%. Mercer International pays out -18.4% of its earnings in the form of a dividend. International Paper pays out -70.9% 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.
Analyst Ratings
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score | |
| Mercer International | 1 | 4 | 0 | 0 | 1.80 |
| International Paper | 3 | 4 | 7 | 0 | 2.29 |
Mercer International currently has a consensus target price of $4.25, suggesting a potential upside of 109.88%. International Paper has a consensus target price of $51.95, suggesting a potential upside of 40.24%. Given Mercer International’s higher probable upside, analysts plainly believe Mercer International is more favorable than International Paper.
Risk & Volatility
Mercer International has a beta of 0.96, suggesting that its stock price is 4% less volatile than the S&P 500. Comparatively, International Paper has a beta of 1.1, suggesting that its stock price is 10% more volatile than the S&P 500.
Earnings and Valuation
This table compares Mercer International and International Paper”s revenue, earnings per share and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio | |
| Mercer International | $1.95 billion | 0.07 | -$85.14 million | ($1.63) | -1.24 |
| International Paper | $21.93 billion | 0.89 | $557.00 million | ($2.61) | -14.19 |
International Paper has higher revenue and earnings than Mercer International. International Paper is trading at a lower price-to-earnings ratio than Mercer International, indicating that it is currently the more affordable of the two stocks.
Profitability
This table compares Mercer International and International Paper’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% |
| International Paper | -0.12% | 2.63% | 1.09% |
Summary
International Paper beats Mercer International on 10 of the 16 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 International Paper
International Paper Company produces and sells renewable fiber-based packaging and pulp products in North America, Latin America, Europe, and North Africa. It operates through two segments, Industrial Packaging and Global Cellulose Fibers. The company offers linerboard, medium, whitetop, recycled linerboard, recycled medium and saturating kraft; and pulp for a range of applications, such as diapers, towel and tissue products, feminine care, incontinence, and other personal care products, as well as specialty pulps for use in textiles, construction materials, paints, coatings, and others. It sells its products directly to end users and converters, as well as through agents, resellers, and distributors. The company was founded in 1898 and is headquartered in Memphis, Tennessee.
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