Financial Comparison: International Paper (NYSE:IP) & Mercer International (NASDAQ:MERC)

International Paper (NYSE:IP) and Mercer International (NASDAQ:MERC) are both basic materials companies, but which is the superior business? We will contrast the two businesses based on the strength of their institutional ownership, earnings, risk, profitability, dividends, valuation and analyst recommendations.

Institutional & Insider Ownership

82.0% of International Paper shares are owned by institutional investors. Comparatively, 85.8% of Mercer International shares are owned by institutional investors. 0.4% of International Paper shares are owned by company insiders. Comparatively, 1.0% of Mercer International shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Analyst Ratings

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

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
International Paper	3	4	7	0	2.29
Mercer International	1	4	0	0	1.80

International Paper presently has a consensus price target of $53.85, indicating a potential upside of 15.34%. Mercer International has a consensus price target of $4.25, indicating a potential upside of 75.62%. Given Mercer International’s higher possible upside, analysts clearly believe Mercer International is more favorable than International Paper.

Valuation & Earnings

This table compares International Paper and Mercer International”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
International Paper	$18.62 billion	1.32	$557.00 million	($0.10)	-466.90
Mercer International	$1.95 billion	0.08	-$85.14 million	($1.63)	-1.48

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 International Paper and Mercer International’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
International Paper	-0.12%	2.63%	1.09%
Mercer International	-5.60%	-23.88%	-4.61%

Dividends

International Paper pays an annual dividend of $1.85 per share and has a dividend yield of 4.0%. Mercer International pays an annual dividend of $0.30 per share and has a dividend yield of 12.4%. International Paper pays out -1,850.0% of its earnings in the form of a dividend. Mercer International pays out -18.4% 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.

Volatility & Risk

International Paper has a beta of 1.1, indicating that its share price is 10% more volatile than the S&P 500. Comparatively, Mercer International has a beta of 0.96, indicating that its share price is 4% less volatile than the S&P 500.

Summary

International Paper beats Mercer International on 11 of the 16 factors compared between the two stocks.

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.

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.