International Paper (NYSE:IP) and Air Products and Chemicals (NYSE:APD) are both large-cap basic materials companies, but which is the better business? We will compare the two businesses based on the strength of their analyst recommendations, profitability, valuation, institutional ownership, earnings, risk and dividends.
Analyst Ratings
This is a breakdown of recent ratings and recommmendations for International Paper and Air Products and Chemicals, as provided by MarketBeat.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score |
---|
International Paper | 3 | 3 | 8 | 0 | 2.36 |
Air Products and Chemicals | 0 | 5 | 14 | 0 | 2.74 |
International Paper presently has a consensus price target of $47.8889, indicating a potential downside of 7.99%. Air Products and Chemicals has a consensus price target of $295.60, indicating a potential upside of 15.28%. Given Air Products and Chemicals' stronger consensus rating and higher probable upside, analysts clearly believe Air Products and Chemicals is more favorable than International Paper.
Earnings and Valuation
This table compares International Paper and Air Products and Chemicals' gross revenue, earnings per share (EPS) and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio |
---|
International Paper | $22.38 billion | 0.91 | $1.23 billion | $4.43 | 11.75 |
Air Products and Chemicals | $8.86 billion | 6.41 | $1.89 billion | $8.38 | 30.60 |
Air Products and Chemicals has lower revenue, but higher earnings than International Paper. International Paper is trading at a lower price-to-earnings ratio than Air Products and Chemicals, indicating that it is currently the more affordable of the two stocks.
Insider and Institutional Ownership
81.6% of International Paper shares are held by institutional investors. Comparatively, 82.8% of Air Products and Chemicals shares are held by institutional investors. 0.4% of International Paper shares are held by insiders. Comparatively, 0.4% of Air Products and Chemicals shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company will outperform the market over the long term.
Dividends
International Paper pays an annual dividend of $2.05 per share and has a dividend yield of 3.9%. Air Products and Chemicals pays an annual dividend of $5.36 per share and has a dividend yield of 2.1%. International Paper pays out 46.3% of its earnings in the form of a dividend. Air Products and Chemicals pays out 64.0% 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. International Paper has raised its dividend for 1 consecutive years and Air Products and Chemicals has raised its dividend for 39 consecutive years. International Paper is clearly the better dividend stock, given its higher yield and lower payout ratio.
Profitability
This table compares International Paper and Air Products and Chemicals' net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets |
---|
International Paper | 2.37% | 17.27% | 3.79% |
Air Products and Chemicals | 21.30% | 15.48% | 8.36% |
Volatility and Risk
International Paper has a beta of 1.1, suggesting that its share price is 10% more volatile than the S&P 500. Comparatively, Air Products and Chemicals has a beta of 0.76, suggesting that its share price is 24% less volatile than the S&P 500.
Summary
Air Products and Chemicals beats International Paper on 11 of the 17 factors compared between the two stocks.