LSC Communications (NYSE: LKSD) and Quad/Graphics (NYSE:QUAD) are both small-cap industrial products companies, but which is the superior business? We will compare the two companies based on the strength of their profitability, earnings, analyst recommendations, risk, valuation, dividends and institutional ownership.

Analyst Recommendations

This is a breakdown of recent recommendations for LSC Communications and Quad/Graphics, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
LSC Communications 0 4 0 0 2.00
Quad/Graphics 0 0 1 0 3.00

LSC Communications currently has a consensus target price of $24.00, indicating a potential upside of 50.09%. Given LSC Communications’ higher probable upside, equities research analysts clearly believe LSC Communications is more favorable than Quad/Graphics.

Dividends

LSC Communications pays an annual dividend of $1.00 per share and has a dividend yield of 6.3%. Quad/Graphics pays an annual dividend of $1.20 per share and has a dividend yield of 5.3%. LSC Communications pays out 344.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Quad/Graphics pays out 69.4% of its earnings in the form of a dividend.

Profitability

This table compares LSC Communications and Quad/Graphics’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
LSC Communications 0.28% 24.72% 3.35%
Quad/Graphics 2.15% 21.87% 4.02%

Volatility & Risk

LSC Communications has a beta of 5.95, suggesting that its share price is 495% 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.

Institutional and Insider Ownership

84.4% of LSC Communications shares are held by institutional investors. Comparatively, 49.7% of Quad/Graphics shares are held by institutional investors. 2.5% of LSC Communications shares are held by company insiders. Comparatively, 9.3% of Quad/Graphics shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.

Valuation & Earnings

This table compares LSC Communications and Quad/Graphics’ revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
LSC Communications $3.65 billion 0.15 $106.00 million $0.29 55.14
Quad/Graphics $4.33 billion 0.27 $44.90 million $1.73 13.12

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

Summary

Quad/Graphics beats LSC Communications on 10 of the 16 factors compared between the two stocks.

LSC Communications Company Profile

LSC Communications, Inc. focuses on traditional and digital print, print-related services and office products. The Company’s segments are Print and Office Products. The Company, through its Print segment, provides a range of print product offerings, which include magazines, catalogs, retail inserts, books and directories. In addition to printed products, the Company also provides a number of print-related services, such as supply chain management, mail services, e-book formatting and distribution services. Its Print segment services over 3,000 customers, including publishers of magazines, books and directories, online retailers, catalogers, mass merchandisers and contract stationers. In its Office Products segment, the Company manufactures and sells a range of branded and private label products, primarily within the core categories, including filing products; note-taking products; binder products; tax and stock forms, and envelopes.

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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