Analyzing Graphic Packaging (NYSE:GPK) and Packaging Corporation of America (NYSE:PKG)

Packaging Corporation of America (NYSE:PKG) and Graphic Packaging (NYSE:GPK) are both materials companies, but which is the superior stock? We will contrast the two businesses based on the strength of their risk, analyst recommendations, dividends, profitability, valuation, institutional ownership and earnings.

Profitability

This table compares Packaging Corporation of America and Graphic Packaging’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Packaging Corporation of America	7.40%	19.63%	8.36%
Graphic Packaging	0.86%	6.78%	1.90%

Valuation & Earnings

This table compares Packaging Corporation of America and Graphic Packaging”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Packaging Corporation of America	$8.99 billion	2.52	$774.10 million	$8.12	31.31
Graphic Packaging	$8.64 billion	0.37	$444.00 million	$0.25	43.74

Packaging Corporation of America has higher revenue and earnings than Graphic Packaging. Packaging Corporation of America is trading at a lower price-to-earnings ratio than Graphic Packaging, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a summary of current ratings and target prices for Packaging Corporation of America and Graphic Packaging, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Packaging Corporation of America	0	3	6	1	2.80
Graphic Packaging	3	8	1	0	1.83

Packaging Corporation of America currently has a consensus target price of $275.43, suggesting a potential upside of 8.34%. Graphic Packaging has a consensus target price of $11.01, suggesting a potential upside of 0.70%. Given Packaging Corporation of America’s stronger consensus rating and higher probable upside, analysts clearly believe Packaging Corporation of America is more favorable than Graphic Packaging.

Institutional & Insider Ownership

89.8% of Packaging Corporation of America shares are held by institutional investors. Comparatively, 99.7% of Graphic Packaging shares are held by institutional investors. 1.6% of Packaging Corporation of America shares are held by insiders. Comparatively, 1.5% of Graphic Packaging shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Dividends

Packaging Corporation of America pays an annual dividend of $6.00 per share and has a dividend yield of 2.4%. Graphic Packaging pays an annual dividend of $0.44 per share and has a dividend yield of 4.0%. Packaging Corporation of America pays out 73.9% of its earnings in the form of a dividend. Graphic Packaging pays out 176.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Graphic Packaging has raised its dividend for 1 consecutive years. Graphic Packaging is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Volatility and Risk

Packaging Corporation of America has a beta of 0.76, indicating that its stock price is 24% less volatile than the S&P 500. Comparatively, Graphic Packaging has a beta of 0.65, indicating that its stock price is 35% less volatile than the S&P 500.

Summary

Packaging Corporation of America beats Graphic Packaging on 14 of the 18 factors compared between the two stocks.

About Packaging Corporation of America

Packaging Corporation of America engages in the production of container products. It operates through the following segments: Packaging, Paper, and Corporate and Other. The Packaging segment offers a variety of corrugated packaging products, such as conventional shipping containers. The Paper segment manufactures and sells a range of papers, including communication-based papers, and pressure sensitive papers. The Corporate and Other segment focuses on transportation assets, such as rail cars, and trucks. The company was founded in 1959 and is headquartered in Lake Forest, IL.

About Graphic Packaging

Graphic Packaging Holding Company, together with its subsidiaries, designs, produces, and sells consumer packaging products to brands in food, beverage, foodservice, household, and other consumer products. It operates through three segments: Paperboard Manufacturing, Americas Paperboard Packaging, and Europe Paperboard Packaging. The company offers unbleached, bleached, and recycled paperboard to various paperboard packaging converters and brokers. It also provides paperboard packaging products for consumer packaged goods companies; and cups, lids, and food containers for foodservice companies and quick-service restaurants serving the food, beverage, and consumer product markets, including healthcare and beauty. The company also designs, manufactures, and installs specialized packaging machines. The company sells its products through sales offices, as well as through broker arrangements with third parties in the Americas, Europe, and the Asia Pacific. Graphic Packaging Holding Company was incorporated in 2007 and is headquartered in Atlanta, Georgia.