Verso (VRS) versus SCA (SVCBY) Critical Analysis

SCA (OTCMKTS: SVCBY) and Verso (NYSE:VRS) are both basic materials companies, but which is the superior stock? We will contrast the two businesses based on the strength of their valuation, analyst recommendations, dividends, earnings, profitability, risk and institutional ownership.

Dividends

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SCA pays an annual dividend of $0.14 per share and has a dividend yield of 1.3%. Verso does not pay a dividend. SCA pays out 45.2% of its earnings in the form of a dividend.

Insider and Institutional Ownership

82.2% of Verso shares are held by institutional investors. 4.2% of Verso shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Analyst Recommendations

This is a breakdown of current ratings and recommmendations for SCA and Verso, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
SCA 1 0 0 0 1.00
Verso 0 0 2 0 3.00

Verso has a consensus target price of $27.00, indicating a potential upside of 57.16%. Given Verso’s stronger consensus rating and higher probable upside, analysts plainly believe Verso is more favorable than SCA.

Volatility & Risk

SCA has a beta of 0.61, meaning that its share price is 39% less volatile than the S&P 500. Comparatively, Verso has a beta of 1.35, meaning that its share price is 35% more volatile than the S&P 500.

Profitability

This table compares SCA and Verso’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
SCA 242.91% 3.73% 1.89%
Verso -1.22% -4.83% -1.61%

Valuation and Earnings

This table compares SCA and Verso’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
SCA $1.95 billion 3.56 $16.62 billion $0.31 35.13
Verso $2.46 billion 0.24 -$30.00 million ($0.75) -22.91

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

SCA Company Profile

Svenska Cellulosa Aktiebolaget SCA (publ), a forest products company, develops, produces, and sells forest, wood, pulp, and paper products worldwide. The company offers timber products for the private forest owners; and supplies wood-based products for the industrial and building materials trade. It also provides kraft pulp and chemical thermomechanical pulp; by-products, such as turpentine and tall oil; and green electricity and district heating under the Celeste, Star, and Cirrus brands. In addition, the company offers kraftliner for corrugated transport packaging; container boards; and publication paper for magazines, catalogues, and commercial printing. Further, it provides renewable energy through wind power projects; and marine and land transportation services, as well as manufactures and sells pellets. The company was founded in 1929 and is headquartered in Sundsvall, Sweden.

Verso Company Profile

Verso Corporation produces and sells coated papers in North America. It operates through two segments, Paper and Pulp. The company offers coated freesheet and coated groundwood, specialty, inkjet and digital, supercalendered, and uncoated freesheet papers; and northern bleached hardwood Kraft pulp to manufacture printing, writing, and specialty paper grades, as well as to manufacture tissue products. Its paper products are used primarily in media and marketing applications, including catalogs, magazines, and commercial printing applications, such as high-end advertising brochures, annual reports, and direct-mail advertising; and specialty applications comprising flexible packaging, and label and converting. The company was formerly known as Verso Paper Corp. and changed its name to Verso Corporation in January 2015. Verso Corporation was founded in 2006 and is headquartered in Miamisburg, Ohio.

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