Quad Graphics (NYSE: QUAD) and ARC Document Solutions (NYSE:ARC) are both small-cap industrial products companies, but which is the better investment? We will contrast the two companies based on the strength of their earnings, institutional ownership, profitabiliy, analyst recommendations, risk, dividends and valuation.

Insider and Institutional Ownership

52.4% of Quad Graphics shares are owned by institutional investors. Comparatively, 72.6% of ARC Document Solutions shares are owned by institutional investors. 12.1% of Quad Graphics shares are owned by company insiders. Comparatively, 14.9% of ARC Document Solutions shares are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.

Analyst Recommendations

This is a summary of current ratings for Quad Graphics and ARC Document Solutions, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Quad Graphics 0 0 2 0 3.00
ARC Document Solutions 0 0 1 1 3.50

ARC Document Solutions has a consensus target price of $5.00, suggesting a potential upside of 23.15%. Given ARC Document Solutions’ stronger consensus rating and higher probable upside, analysts plainly believe ARC Document Solutions is more favorable than Quad Graphics.

Profitability

This table compares Quad Graphics and ARC Document Solutions’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Quad Graphics 1.55% 21.12% 3.49%
ARC Document Solutions -12.12% 7.85% 3.14%

Earnings & Valuation

This table compares Quad Graphics and ARC Document Solutions’ gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Quad Graphics $4.29 billion 0.28 $481.60 million $1.28 18.05
ARC Document Solutions $401.50 million 0.47 $58.32 million ($1.06) -3.83

Quad Graphics has higher revenue and earnings than ARC Document Solutions. ARC Document Solutions is trading at a lower price-to-earnings ratio than Quad Graphics, indicating that it is currently the more affordable of the two stocks.

Risk and Volatility

Quad Graphics has a beta of 1.4, meaning that its share price is 40% more volatile than the S&P 500. Comparatively, ARC Document Solutions has a beta of 2.53, meaning that its share price is 153% more volatile than the S&P 500.

Dividends

Quad Graphics pays an annual dividend of $1.20 per share and has a dividend yield of 5.2%. ARC Document Solutions does not pay a dividend. Quad Graphics pays out 93.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Summary

ARC Document Solutions beats Quad Graphics on 9 of the 17 factors compared between the two stocks.

About Quad Graphics

Quad/Graphics, Inc. is a marketing services provider. The Company’s segments are United States Print and Related Services, International and Corporate. The United States Print and Related Services segment consists of the Company’s United States printing operations. The United States Print and Related Services segment includes retail inserts, publications, catalogs, special interest publications, journals, direct mail, books, directories, in-store marketing and promotion, packaging, newspapers, custom print products, other commercial and specialty printed products, and global paper procurement. The United States Print and Related Services segment also includes marketing and other complementary services, including marketing strategy and data insights. The International segment consists of the Company’s printing operations in Europe and Latin America, including operations in England, France, Germany and Poland, as well as investments in printing operations in Brazil and India.

About ARC Document Solutions

ARC Document Solutions, Inc. (ARC) is a document solutions provider for the architectural, engineering and construction (AEC) industry. The Company also provides document solutions to businesses of various types. ARC’s offerings include managed print services (MPS), offsite services, archive and information management (AIM), specialized color printing, Web-based document management applications, digital shipping/managed file transfer, and equipment and supplies sales. MPS is an onsite service where it installs a complete document solution platform in its customers’ offices and project sites. Its Offsite Services offering operates over 180 offsite service centers. AIM enables its customers to store information and intellectual property in a cloud-based and searchable digital archive. The Specialized Color Printing offering is focused on color printing, finishing and assembly of graphic materials. Its Web-Based Document Management Applications develop and offer tools to its customers.

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