Packaging Corp Of America (NYSE: PKG) and International Paper (NYSE:IP) are both large-cap basic materials companies, but which is the better stock? We will contrast the two companies based on the strength of their analyst recommendations, profitability, institutional ownership, risk, dividends, valuation and earnings.

Institutional and Insider Ownership

88.6% of Packaging Corp Of America shares are held by institutional investors. Comparatively, 83.0% of International Paper shares are held by institutional investors. 1.2% of Packaging Corp Of America shares are held by insiders. Comparatively, 0.6% of International Paper shares are held by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Dividends

Packaging Corp Of America pays an annual dividend of $2.52 per share and has a dividend yield of 2.2%. International Paper pays an annual dividend of $1.85 per share and has a dividend yield of 3.4%. Packaging Corp Of America pays out 48.6% of its earnings in the form of a dividend. International Paper pays out 93.9% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Packaging Corp Of America has increased its dividend for 5 consecutive years and International Paper has increased its dividend for 6 consecutive years. International Paper is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Volatility & Risk

Packaging Corp Of America has a beta of 1.86, indicating that its stock price is 86% more volatile than the S&P 500. Comparatively, International Paper has a beta of 1.46, indicating that its stock price is 46% more volatile than the S&P 500.

Profitability

This table compares Packaging Corp Of America and International Paper’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Packaging Corp Of America 9.04% 30.53% 9.78%
International Paper 3.73% 27.09% 3.61%

Analyst Ratings

This is a breakdown of recent ratings and recommmendations for Packaging Corp Of America and International Paper, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Packaging Corp Of America 0 6 4 0 2.40
International Paper 2 4 6 0 2.33

Packaging Corp Of America currently has a consensus price target of $109.22, suggesting a potential downside of 2.72%. International Paper has a consensus price target of $60.63, suggesting a potential upside of 10.85%. Given International Paper’s higher probable upside, analysts plainly believe International Paper is more favorable than Packaging Corp Of America.

Valuation and Earnings

This table compares Packaging Corp Of America and International Paper’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Packaging Corp Of America $6.08 billion 1.73 $1.22 billion $5.19 21.63
International Paper $21.93 billion 1.03 $3.22 billion $1.97 27.76

International Paper has higher revenue and earnings than Packaging Corp Of America. Packaging Corp Of America is trading at a lower price-to-earnings ratio than International Paper, indicating that it is currently the more affordable of the two stocks.

Summary

Packaging Corp Of America beats International Paper on 10 of the 17 factors compared between the two stocks.

Packaging Corp Of America Company Profile

Packaging Corporation of America (PCA) is a producer of containerboard products and uncoated freesheet. The Company operates through three segments: Packaging, Paper, and Corporate and Other. The Packaging segment produces a range of corrugated packaging products. The Paper segment manufactures and sells a range of papers, including communication-based papers and pressure sensitive papers. The Company’s containerboard mills produces linerboard and semi-chemical corrugating medium, which are papers primarily used in the production of corrugated products. The Company’s corrugated products manufacturing plants produce a range of corrugated packaging products, including conventional shipping containers used to protect and transport manufactured goods, multi-color boxes and displays. The Company also produces packaging for meat, fresh fruit and vegetables, processed food, beverages, and other industrial and consumer products.

International Paper Company Profile

International Paper Company is a paper and packaging company with primary markets and manufacturing operations in North America, Europe, Latin America, Russia, Asia, Africa and the Middle East. The Company’s segments include Industrial Packaging, Global Cellulose Fibers, Printing Papers and Consumer Packaging. The Company is a manufacturer of containerboard in the United States. Its products include linerboard, medium, whitetop, recycled linerboard, recycled medium and saturating kraft. The Company’s cellulose fibers product portfolio includes fluff, market and specialty pulps. The Company is a producer of printing and writing papers. The products in Printing Papers segment include uncoated papers. The Company is a producer of solid bleached sulfate board. As of December 31, 2016, the Company operated 29 pulp, paper and packaging mills, 170 converting and packaging plants, 16 recycling plants and three bag facilities in the United States.

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