Financial Comparison: Stella-Jones (OTCMKTS:STLJF) versus Mercer International (NASDAQ:MERC)

Mercer International (NASDAQ:MERC) and Stella-Jones (OTCMKTS:STLJF) are both materials companies, but which is the superior stock? We will contrast the two companies based on the strength of their valuation, profitability, risk, earnings, institutional ownership, analyst recommendations and dividends.

Insider and Institutional Ownership

85.8% of Mercer International shares are owned by institutional investors. 1.2% of Mercer International shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock is poised for long-term growth.

Analyst Recommendations

This is a summary of recent ratings and target prices for Mercer International and Stella-Jones, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Mercer International	4	2	0	0	1.33
Stella-Jones	0	2	2	0	2.50

Mercer International presently has a consensus price target of $1.20, indicating a potential upside of 102.09%. Given Mercer International’s higher possible upside, analysts clearly believe Mercer International is more favorable than Stella-Jones.

Earnings and Valuation

This table compares Mercer International and Stella-Jones”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Mercer International	$1.86 billion	0.02	-$497.89 million	($7.73)	-0.08
Stella-Jones	$2.50 billion	1.20	$241.19 million	$1.47	37.37

Stella-Jones has higher revenue and earnings than Mercer International. Mercer International is trading at a lower price-to-earnings ratio than Stella-Jones, indicating that it is currently the more affordable of the two stocks.

Dividends

Mercer International pays an annual dividend of $0.07 per share and has a dividend yield of 11.8%. Stella-Jones pays an annual dividend of $0.99 per share and has a dividend yield of 1.8%. Mercer International pays out -0.9% of its earnings in the form of a dividend. Stella-Jones pays out 67.3% 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. Mercer International is clearly the better dividend stock, given its higher yield and lower payout ratio.

Profitability

This table compares Mercer International and Stella-Jones’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Mercer International	-27.86%	-203.05%	-13.61%
Stella-Jones	8.66%	14.92%	7.39%

Summary

Stella-Jones beats Mercer International on 10 of the 15 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 Stella-Jones

Stella-Jones Inc. produces and sells pressure-treated wood products in Canada and the United States. It operates through two segments, Pressure-Treated Wood; and Logs and Lumber. The company offers railway ties and timbers for short line and commercial railroad operators; and wood utility poles for electrical utilities and telecommunication companies. It also provides residential lumber and accessories to retailers for outdoor applications; industrial products, which include wood for railway bridges and crossings, marine and foundation pilings, construction timbers, and coal tar-based products; and lumber for local home-building markets. Stella-Jones Inc. was incorporated in 1992 and is headquartered in Saint-Laurent, Canada.