Contrasting LSC Communications (LKSD) & Encore Wire (WIRE)

Encore Wire (NASDAQ: WIRE) and LSC Communications (NYSE:LKSD) are both small-cap industrial products companies, but which is the superior investment? We will contrast the two businesses based on the strength of their earnings, valuation, institutional ownership, risk, profitability, dividends and analyst recommendations.

Insider and Institutional Ownership

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88.9% of Encore Wire shares are held by institutional investors. Comparatively, 87.4% of LSC Communications shares are held by institutional investors. 3.8% of Encore Wire shares are held by insiders. Comparatively, 2.5% of LSC Communications shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Profitability

This table compares Encore Wire and LSC Communications’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Encore Wire 5.76% 8.94% 7.74%
LSC Communications -1.58% 25.28% 3.42%

Dividends

Encore Wire pays an annual dividend of $0.08 per share and has a dividend yield of 0.1%. LSC Communications pays an annual dividend of $1.04 per share and has a dividend yield of 6.3%. Encore Wire pays out 3.1% of its earnings in the form of a dividend. LSC Communications pays out 52.8% 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.

Earnings and Valuation

This table compares Encore Wire and LSC Communications’ revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Encore Wire $1.16 billion 1.00 $67.01 million $2.61 21.32
LSC Communications $3.60 billion 0.16 -$57.00 million $1.97 8.34

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

Volatility & Risk

Encore Wire has a beta of 2, indicating that its stock price is 100% more volatile than the S&P 500. Comparatively, LSC Communications has a beta of 0.04, indicating that its stock price is 96% less volatile than the S&P 500.

Analyst Ratings

This is a breakdown of recent recommendations for Encore Wire and LSC Communications, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Encore Wire 0 1 1 0 2.50
LSC Communications 1 2 0 0 1.67

Encore Wire currently has a consensus target price of $56.00, indicating a potential upside of 0.63%. LSC Communications has a consensus target price of $23.50, indicating a potential upside of 43.12%. Given LSC Communications’ higher possible upside, analysts plainly believe LSC Communications is more favorable than Encore Wire.

Summary

Encore Wire beats LSC Communications on 12 of the 16 factors compared between the two stocks.

About Encore Wire

Encore Wire Corporation manufactures and sells electrical building wire and cable products for interior electrical wiring in the United States. Its products include NM-B cable for use as interior wiring in homes, apartments, and manufactured housing; THHN/THWN-2, metal-clad, and armored cables for use primarily as wiring in commercial and industrial buildings; UF-B cables; XHHW-2 cables; RHH/RHW-2 cables; and other types of wire products. The company markets its products primarily through independent manufacturers' representatives to wholesale electrical distributors. Encore Wire Corporation was founded in 1989 and is headquartered in McKinney, Texas.

About LSC Communications

LSC Communications, Inc. provides various traditional and digital print services, print-related services, and office products. It operates through Print and Office Products segments. The Print segment produces magazines, catalogs, retail inserts, books, and directories. It also provides supply-chain management and various print-related services, including mail-list management and sortation, e-book formatting, and distribution services. This segment provides its services to retailers, including catalogers and merchandisers; and publishers of magazines, books, and directories, as well as online retailers in the United States, Europe, and Mexico. The Office Products segment manufactures and sells filing products, including presentation and storage materials under the Pendaflex and other brands, as well as under private label brands for third parties; note-taking products, such as legal pads, journals, index cards, spiral notebooks, composition books, and notebook filler paper under the TOPS, Ampad, Oxford, and other brands, as well as under private label brands for third parties; binder products comprising various binders and binder accessories under the Cardinal, Oxford, and other brands, as well as under private label brands for third parties; forms consisting of business forms, tax forms, message and memo pads, financial forms, and recordkeeping materials under the Adams brand, as well as under the private label forms for third parties; envelopes under the Ampad brand names, as well as under its private label; and commodity and specialty filing supplies. This segment primarily offers its products to office superstores, office supply wholesalers, independent contract stationers, mass merchandisers and retailers, and e-commerce resellers in the United States and Canada. LSC Communications, Inc. also provides warehousing, fulfillment, and supply chain management services, as well as e-services. The company was incorporated in 2016 and is based in Chicago, Illinois.

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