Sylvamo (NYSE:SLVM) versus Sappi (OTCMKTS:SPPJY) Critical Survey

Sappi (OTCMKTS:SPPJY) and Sylvamo (NYSE:SLVM) are both small-cap basic materials companies, but which is the superior business? We will compare the two businesses based on the strength of their earnings, analyst recommendations, risk, institutional ownership, valuation, dividends and profitability.

Institutional & Insider Ownership

91.2% of Sylvamo shares are owned by institutional investors. 0.7% of Sappi shares are owned by company insiders. Comparatively, 0.7% of Sylvamo shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock will outperform the market over the long term.

Dividends

Sappi pays an annual dividend of $0.10 per share and has a dividend yield of 7.7%. Sylvamo pays an annual dividend of $1.80 per share and has a dividend yield of 4.2%. Sappi pays out 58.8% of its earnings in the form of a dividend. Sylvamo pays out 34.4% 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. Sylvamo has raised its dividend for 3 consecutive years.

Earnings and Valuation

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

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Sappi	$5.46 billion	0.13	$33.00 million	$0.17	7.65
Sylvamo	$3.77 billion	0.46	$302.00 million	$5.23	8.25

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

Risk & Volatility

Sappi has a beta of 0.87, suggesting that its stock price is 13% less volatile than the S&P 500. Comparatively, Sylvamo has a beta of 0.96, suggesting that its stock price is 4% less volatile than the S&P 500.

Analyst Ratings

This is a breakdown of recent recommendations for Sappi and Sylvamo, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Sappi	0	1	0	0	2.00
Sylvamo	2	2	0	0	1.50

Sylvamo has a consensus target price of $56.50, indicating a potential upside of 30.94%. Given Sylvamo’s higher probable upside, analysts clearly believe Sylvamo is more favorable than Sappi.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Sappi	1.75%	6.12%	2.53%
Sylvamo	6.11%	23.99%	8.14%

Summary

Sylvamo beats Sappi on 13 of the 16 factors compared between the two stocks.

About Sappi

Sappi Limited, together with its subsidiaries, engages in the provision of materials made from woodfiber-based renewable resources in Europe, North America, and South Africa. The company manufacture and sells dissolving pulp, and wood and paper pulp; graphic papers, coated and uncoated papers, and casting and release papers; and packaging and specialty papers, including packaging and specialty papers, including flexible packaging papers, label papers, functional paper packaging products, containerboards, paperboards, silicone base papers, and dye sublimation papers. It also provides biomaterials, such as valida, lignin, furfural, and sweeteners, as well as forestry products; and engages in the treasury and insurance business. The company was founded in 1936 and is headquartered in Johannesburg, South Africa.

About Sylvamo

Sylvamo Corporation produces and markets uncoated freesheet for cutsize, offset paper, and pulp in Latin America, Europe, and North America. The company operates through Europe, Latin America, and North America segments. The Europe segment offers copy, tinted, and colored laser printing paper under REY Adagio and Pro-Design brands; and graphic and high-speed inkjet printing papers under the brand Jetstar; as well as produces uncoated freesheet papers. The Latin America segment focuses on uncoated freesheet paper under Chamex, Chamequinho and Chambril brands, as well as produces HP papers. This segment also operates integrated mills and non-integrated mills. The North America segment offers imaging, commercial printing, and converting papers, as well as uncoated papers under Hammermill, Springhill, Williamsburg, Accent, DRM and Postmark brand names. It distributes its products through a variety of channels, including retail merchants, e-commerce, agents, resellers, and paper distributors. The company was founded in 1898 and is headquartered in Memphis, Tennessee.