R.R. Donnelley & Sons (NYSE: RRD) and Quad/Graphics (NYSE:QUAD) are both small-cap business services companies, but which is the better business? We will contrast the two companies based on the strength of their profitability, institutional ownership, earnings, risk, analyst recommendations, dividends and valuation.

Dividends

R.R. Donnelley & Sons pays an annual dividend of $0.56 per share and has a dividend yield of 6.7%. Quad/Graphics pays an annual dividend of $1.20 per share and has a dividend yield of 5.4%. R.R. Donnelley & Sons pays out -7.9% of its earnings in the form of a dividend. Quad/Graphics pays out 69.0% 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. R.R. Donnelley & Sons is clearly the better dividend stock, given its higher yield and lower payout ratio.

Profitability

This table compares R.R. Donnelley & Sons and Quad/Graphics’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
R.R. Donnelley & Sons -7.15% -42.52% 1.57%
Quad/Graphics 2.15% 21.87% 4.02%

Insider & Institutional Ownership

85.9% of R.R. Donnelley & Sons shares are held by institutional investors. Comparatively, 49.6% of Quad/Graphics shares are held by institutional investors. 2.3% of R.R. Donnelley & Sons shares are held by insiders. Comparatively, 12.1% of Quad/Graphics 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.

Analyst Ratings

This is a breakdown of recent ratings and target prices for R.R. Donnelley & Sons and Quad/Graphics, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
R.R. Donnelley & Sons 0 0 0 0 N/A
Quad/Graphics 0 0 1 0 3.00

Risk and Volatility

R.R. Donnelley & Sons has a beta of 1.98, suggesting that its share price is 98% more volatile than the S&P 500. Comparatively, Quad/Graphics has a beta of 1.47, suggesting that its share price is 47% more volatile than the S&P 500.

Valuation & Earnings

This table compares R.R. Donnelley & Sons and Quad/Graphics’ top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
R.R. Donnelley & Sons $6.90 billion 0.08 -$495.90 million ($7.07) -1.18
Quad/Graphics $4.33 billion 0.26 $44.90 million $1.74 12.66

Quad/Graphics has lower revenue, but higher earnings than R.R. Donnelley & Sons. R.R. Donnelley & Sons is trading at a lower price-to-earnings ratio than Quad/Graphics, indicating that it is currently the more affordable of the two stocks.

Summary

Quad/Graphics beats R.R. Donnelley & Sons on 9 of the 14 factors compared between the two stocks.

R.R. Donnelley & Sons Company Profile

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.

Quad/Graphics Company Profile

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.

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