ARC Document Solutions (NYSE: ARC) and RR Donnelley & Sons Co (NASDAQ:RRD) are both small-cap industrial products companies, but which is the superior investment? We will contrast the two companies based on the strength of their earnings, risk, profitabiliy, valuation, dividends, institutional ownership and analyst recommendations.

Insider and Institutional Ownership

71.9% of ARC Document Solutions shares are owned by institutional investors. 14.9% of ARC Document Solutions shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Dividends

RR Donnelley & Sons Co pays an annual dividend of $1.04 per share and has a dividend yield of 11.0%. ARC Document Solutions does not pay a dividend. RR Donnelley & Sons Co pays out 196.2% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Profitability

This table compares ARC Document Solutions and RR Donnelley & Sons Co’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
ARC Document Solutions 2.72% 7.00% 2.91%
RR Donnelley & Sons Co -2.97% N/A -4.88%

Earnings and Valuation

This table compares ARC Document Solutions and RR Donnelley & Sons Co’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
ARC Document Solutions $400.01 million 0.45 $56.98 million $0.24 16.21
RR Donnelley & Sons Co $6.94 billion 0.10 $479.40 million $0.53 17.81

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

Volatility & Risk

ARC Document Solutions has a beta of 2.5, indicating that its stock price is 150% more volatile than the S&P 500. Comparatively, RR Donnelley & Sons Co has a beta of 1.74, indicating that its stock price is 74% more volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of current ratings and recommmendations for ARC Document Solutions and RR Donnelley & Sons Co, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
ARC Document Solutions 0 0 1 1 3.50
RR Donnelley & Sons Co 0 0 0 0 N/A

ARC Document Solutions presently has a consensus price target of $5.25, indicating a potential upside of 34.96%. Given ARC Document Solutions’ higher probable upside, equities research analysts plainly believe ARC Document Solutions is more favorable than RR Donnelley & Sons Co.

Summary

ARC Document Solutions beats RR Donnelley & Sons Co on 11 of the 15 factors compared between the two stocks.

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.

About RR Donnelley & Sons Co

R.R. Donnelley & Sons Company helps organizations communicate by working to create, manage, produce, distribute and process content on behalf of its customers. The Company’s segments include Variable Print, Strategic Services, International and Corporate. The Variable Print segment includes the Company’s United States short-run and transactional printing operations. The Variable Print segment’s primary product offerings include commercial and digital print, direct mail, labels, statement printing, forms and packaging. The Strategic Services segment includes the Company’s logistics services, print management offerings and digital and creative solutions. The International segment includes the Company’s non-United States printing operations in Asia, Latin America and Canada. The International segment’s primary product and service offerings include magazines, catalogs, retail inserts, books, directories, direct mail, logistics services and digital and creative solutions.

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