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

Profitability

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

Analyst Ratings

This is a breakdown of recent recommendations and price targets for Resolute Forest Products and Domtar, 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 3 7 5 0 2.13

Resolute Forest Products presently has a consensus target price of $9.08, indicating a potential upside of 0.37%. Domtar has a consensus target price of $43.27, indicating a potential downside of 4.26%. Given Resolute Forest Products’ higher possible upside, equities analysts plainly believe Resolute Forest Products is more favorable than Domtar.

Risk & Volatility

Resolute Forest Products has a beta of 1.71, meaning that its share price is 71% more volatile than the S&P 500. Comparatively, Domtar has a beta of 1.63, meaning that its share price is 63% more volatile than the S&P 500.

Institutional & Insider Ownership

88.3% of Resolute Forest Products shares are owned by institutional investors. Comparatively, 94.5% of Domtar shares are owned by institutional investors. 1.1% of Resolute Forest Products shares are owned by insiders. Comparatively, 1.0% of Domtar shares are owned by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Dividends

Domtar pays an annual dividend of $1.66 per share and has a dividend yield of 3.7%. Resolute Forest Products does not pay a dividend. Domtar pays out -49.1% of its earnings in the form of a dividend. Domtar has increased its dividend for 8 consecutive years.

Valuation & Earnings

This table compares Resolute Forest Products and Domtar’s gross 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 0.23 -$84.00 million ($0.94) -9.63
Domtar $5.16 billion 0.55 -$258.00 million ($3.38) -13.37

Resolute Forest Products has higher earnings, but lower revenue than Domtar. Domtar is trading at a lower price-to-earnings ratio than Resolute Forest Products, indicating that it is currently the more affordable of the two stocks.

Summary

Domtar beats Resolute Forest Products on 10 of the 17 factors compared between the two stocks.

Resolute Forest Products Company Profile

Resolute Forest Products Inc. operates in the forest products industry. It offers a range of forest products, including market pulp, tissue, wood products, newsprint and specialty papers. As of December 31, 2016, it owned or operated over 40 pulp, paper, tissue and wood products facilities in the United States and Canada. Its segments include market pulp, tissue, wood products, newsprint and specialty papers. As of December 31, 2016, it produced market pulp at seven facilities in North America, with total capacity of approximately 1.7 million metric tons. As of December 31, 2016, it produced tissue products at two facilities in North America, both located in Florida. As of December 31, 2016, it operated 16 sawmills in Canada that produces construction-grade lumber sold in North America, on the east coast. As of December 31, 2016, it produced newsprint at 10 facilities in North America. As of December 31, 2016, it produced specialty papers at five facilities in North America.

Domtar Company Profile

Domtar Corporation designs, manufactures, markets and distributes a range of fiber-based products, including communication papers, specialty and packaging papers and absorbent hygiene products. The Company segments include Pulp and Paper and Personal Care. The Pulp and Paper segment consists of the design, manufacturing, marketing and distribution of communication, specialty and packaging papers, as well as softwood, fluff and hardwood market pulp. The Personal Care segment consists of the design, manufacturing, marketing and distribution of absorbent hygiene products. The Company is a marketer of uncoated freesheet paper in North America serving a range of customers, including merchants, retail outlets, stationers, printers, publishers, converters and end users. It is also a marketer and producer of a line of incontinence care products, as well as infant diapers. It has a network of wood fiber converting assets that produce paper grade, fluff and specialty pulp.

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