Head-To-Head Contrast: Mercer International (NASDAQ:MERC) & Sappi (OTCMKTS:SPPJY)

Sappi (OTCMKTS:SPPJY) and Mercer International (NASDAQ:MERC) are both small-cap materials companies, but which is the superior investment? We will compare the two companies based on the strength of their dividends, profitability, analyst recommendations, institutional ownership, earnings, risk and valuation.

Analyst Ratings

This is a breakdown of recent ratings and recommmendations for Sappi and Mercer International, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Sappi	0	1	0	0	2.00
Mercer International	5	1	0	0	1.17

Mercer International has a consensus target price of $0.85, suggesting a potential upside of 225.67%. Given Mercer International’s higher possible upside, analysts clearly believe Mercer International is more favorable than Sappi.

Valuation & Earnings

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

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Sappi	$5.28 billion	0.08	-$747.00 million	($1.23)	-0.56
Mercer International	$1.87 billion	0.01	-$497.89 million	($7.40)	-0.04

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

Volatility and Risk

Sappi has a beta of 0.59, indicating that its share price is 41% less volatile than the S&P 500. Comparatively, Mercer International has a beta of 0.67, indicating that its share price is 33% less volatile than the S&P 500.

Profitability

This table compares Sappi and Mercer International’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Sappi	-14.16%	-6.64%	-2.33%
Mercer International	-26.95%	-352.57%	-14.57%

Institutional & Insider Ownership

85.8% of Mercer International shares are held by institutional investors. 0.7% of Sappi shares are held by insiders. Comparatively, 1.2% of Mercer International shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company is poised for long-term growth.

Summary

Sappi beats Mercer International on 7 of the 13 factors compared between the two stocks.

About Sappi

Sappi Limited is a global woodfibre company headquartered in Johannesburg, South Africa. Founded in 1936, the company has evolved from a South African paper producer into an international supplier of pulp, paper and related products. Sappi’s businesses include dissolving pulp, used in applications such as viscose textiles and other cellulose-based products; graphic papers for printing and publishing; and packaging and speciality papers. The company also develops biomaterials and other products made from renewable woodfibre.

About Mercer International

Mercer International Inc. is a global producer of market northern bleached softwood kraft (NBSK) pulp, a wood-fiber material used to manufacture tissue, printing and writing papers, specialty papers, and other fiber-based products. The company sells its pulp to customers in a range of international markets, primarily through direct sales and established distribution channels. Mercer operates pulp mills in Germany and Canada. Its German operations include the Rosenthal mill in Blankenstein and the Stendal mill in Arneburg, while its Canadian operations include the Celgar mill in Castlegar, British Columbia.