Critical Analysis: Sylvamo (NYSE:SLVM) versus Louisiana-Pacific (NYSE:LPX)

Louisiana-Pacific (NYSE:LPX) and Sylvamo (NYSE:SLVM) are both materials companies, but which is the superior investment? We will contrast the two companies based on the strength of their earnings, dividends, valuation, profitability, risk, analyst recommendations and institutional ownership.

Dividends

Louisiana-Pacific pays an annual dividend of $1.20 per share and has a dividend yield of 1.6%. Sylvamo pays an annual dividend of $1.80 per share and has a dividend yield of 4.7%. Louisiana-Pacific pays out 122.4% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Sylvamo pays out -39.9% of its earnings in the form of a dividend. Louisiana-Pacific has increased its dividend for 7 consecutive years and Sylvamo has increased its dividend for 3 consecutive years. Sylvamo is clearly the better dividend stock, given its higher yield and lower payout ratio.

Volatility and Risk

Louisiana-Pacific has a beta of 1.67, indicating that its stock price is 67% more volatile than the S&P 500. Comparatively, Sylvamo has a beta of 0.87, indicating that its stock price is 13% less volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of recent ratings and price targets for Louisiana-Pacific and Sylvamo, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Louisiana-Pacific	1	2	11	0	2.71
Sylvamo	1	3	2	0	2.17

Louisiana-Pacific currently has a consensus price target of $88.27, suggesting a potential upside of 16.43%. Sylvamo has a consensus price target of $43.25, suggesting a potential upside of 12.13%. Given Louisiana-Pacific’s stronger consensus rating and higher probable upside, equities research analysts clearly believe Louisiana-Pacific is more favorable than Sylvamo.

Insider & Institutional Ownership

94.7% of Louisiana-Pacific shares are held by institutional investors. Comparatively, 91.2% of Sylvamo shares are held by institutional investors. 0.7% of Louisiana-Pacific shares are held by insiders. Comparatively, 0.8% of Sylvamo shares are held by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Valuation and Earnings

This table compares Louisiana-Pacific and Sylvamo”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Louisiana-Pacific	$2.71 billion	1.96	$146.00 million	$0.98	77.36
Sylvamo	$3.35 billion	0.46	$132.00 million	($4.51)	-8.55

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

Profitability

This table compares Louisiana-Pacific and Sylvamo’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Louisiana-Pacific	2.72%	4.84%	3.21%
Sylvamo	-5.81%	8.36%	2.66%

Summary

Louisiana-Pacific beats Sylvamo on 12 of the 17 factors compared between the two stocks.

About Louisiana-Pacific

Louisiana-Pacific Corporation (LP) manufactures building products for residential construction, repair and remodeling, and light commercial markets. Its portfolio includes engineered wood siding and trim, oriented strand board (OSB) panels, and other structural and specialty building products. The company’s products include LP SmartSide siding and trim, LP OSB sheathing, and solutions designed for applications such as radiant heat control and fire-rated construction. LP serves customers primarily in North America and also has operations in South America.

About Sylvamo

Sylvamo Corporation is a global paper company that produces uncoated freesheet paper for a range of uses, including office and home printing, commercial printing, and publishing. Its products include copy and office papers, as well as specialty papers and market pulp. The company serves customers in North America, Latin America, and Europe. Its operations include manufacturing facilities in the United States, Brazil, and Europe, with products sold under various regional and consumer paper brands.