West Fraser Timber (NYSE:WFG) vs. Mercer International (NASDAQ:MERC) Head-To-Head Contrast

Mercer International (NASDAQ:MERC) and West Fraser Timber (NYSE:WFG) are both materials companies, but which is the better investment? We will contrast the two companies based on the strength of their analyst recommendations, institutional ownership, earnings, profitability, valuation, dividends and risk.

Volatility & Risk

Mercer International has a beta of 0.53, suggesting that its stock price is 47% less volatile than the S&P 500. Comparatively, West Fraser Timber has a beta of 1, suggesting that its stock price has a similar volatility profile to the S&P 500.

Earnings and Valuation

This table compares Mercer International and West Fraser Timber”s top-line revenue, earnings per share (EPS) 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)	-0.06
West Fraser Timber	$5.46 billion	1.02	-$937.00 million	($15.44)	-4.62

Mercer International has higher earnings, but lower revenue than West Fraser Timber. West Fraser Timber 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 West Fraser Timber’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Mercer International	-27.86%	-352.57%	-13.99%
West Fraser Timber	-22.98%	-10.84%	-8.19%

Analyst Recommendations

This is a summary of current ratings and target prices for Mercer International and West Fraser Timber, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Mercer International	4	2	0	0	1.33
West Fraser Timber	1	3	4	0	2.38

Mercer International currently has a consensus target price of $1.13, suggesting a potential upside of 126.00%. West Fraser Timber has a consensus target price of $83.20, suggesting a potential upside of 16.58%. Given Mercer International’s higher possible upside, research analysts clearly believe Mercer International is more favorable than West Fraser Timber.

Insider and Institutional Ownership

85.8% of Mercer International shares are owned by institutional investors. Comparatively, 40.2% of West Fraser Timber shares are owned by institutional investors. 1.2% of Mercer International shares are owned by company insiders. Comparatively, 1.8% of West Fraser Timber shares are owned by company 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 $0.07 per share and has a dividend yield of 14.0%. West Fraser Timber pays an annual dividend of $1.28 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. West Fraser Timber pays out -8.3% 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. West Fraser Timber has raised its dividend for 3 consecutive years.

Summary

West Fraser Timber beats Mercer International on 11 of the 17 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 West Fraser Timber

West Fraser Timber Co. Ltd., a diversified wood products company, engages in manufacturing, selling, marketing, and distributing lumber, engineered wood products, pulp, newsprint, wood chips, and other residuals and renewable energy. It offers spruce-pine-fir, douglas fir-larch, hem-fir, and southern yellow pine lumber, treated wood products, medium density fiberboard panels and plywood, oriented strand board, and laminated veneer lumber wood products, as well as particleboards. The company also provides northern bleached softwood Kraft pulp and bleached chemical thermo-mechanical pulp used to produce various paper products, including printing and writing papers, paperboard products, tissue and towel products, and a variety of other paper grades. Further, it offers bioproducts, including bioenergy and biomaterial. Its products are used in home construction, repair and remodeling, papers, tissue, and box materials, and industrial applications. The company sells its products to major retail chains, contractor supply yards, and wholesalers, as well as industrial customers for further processing or as components for other products in Canada, the United States, the United Kingdom, Europe, and internationally. West Fraser Timber Co. Ltd. was founded in 1955 and is headquartered in Vancouver, Canada.