Critical Survey: Potlatch (PCH) versus CatchMark Timber Trust (CTT)

Potlatch (NASDAQ: PCH) and CatchMark Timber Trust (NYSE:CTT) are both construction companies, but which is the better investment? We will contrast the two businesses based on the strength of their earnings, institutional ownership, valuation, risk, dividends, profitability and analyst recommendations.

Valuation & Earnings

This table compares Potlatch and CatchMark Timber Trust’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Potlatch $599.10 million 3.47 $10.93 million $2.17 23.57
CatchMark Timber Trust $81.86 million 6.92 -$11.07 million ($0.34) -38.35

Potlatch has higher revenue and earnings than CatchMark Timber Trust. CatchMark Timber Trust is trading at a lower price-to-earnings ratio than Potlatch, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Potlatch and CatchMark Timber Trust’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Potlatch 13.54% 54.42% 9.75%
CatchMark Timber Trust -15.09% -3.64% -1.90%

Institutional & Insider Ownership

84.8% of Potlatch shares are owned by institutional investors. Comparatively, 63.7% of CatchMark Timber Trust shares are owned by institutional investors. 1.5% of Potlatch shares are owned by insiders. Comparatively, 1.2% of CatchMark Timber Trust shares are owned by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock will outperform the market over the long term.

Dividends

Potlatch pays an annual dividend of $1.50 per share and has a dividend yield of 2.9%. CatchMark Timber Trust pays an annual dividend of $0.54 per share and has a dividend yield of 4.1%. Potlatch pays out 69.1% of its earnings in the form of a dividend. CatchMark Timber Trust pays out -158.8% 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. CatchMark Timber Trust has increased its dividend for 2 consecutive years. CatchMark Timber Trust is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Ratings

This is a breakdown of current ratings and recommmendations for Potlatch and CatchMark Timber Trust, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Potlatch 3 3 0 0 1.50
CatchMark Timber Trust 0 0 1 0 3.00

Potlatch presently has a consensus price target of $47.00, suggesting a potential downside of 8.11%. CatchMark Timber Trust has a consensus price target of $12.50, suggesting a potential downside of 4.14%. Given CatchMark Timber Trust’s stronger consensus rating and higher probable upside, analysts clearly believe CatchMark Timber Trust is more favorable than Potlatch.

Risk & Volatility

Potlatch has a beta of 1.44, indicating that its share price is 44% more volatile than the S&P 500. Comparatively, CatchMark Timber Trust has a beta of 0.69, indicating that its share price is 31% less volatile than the S&P 500.

Summary

Potlatch beats CatchMark Timber Trust on 9 of the 16 factors compared between the two stocks.

Potlatch Company Profile

Potlatch Corporation is a real estate investment trust (REIT), which is primarily engaged in activities associated with timberland management, including the sale of timber, management of timberlands, and purchase and sale of timberlands. The Company is also engaged in the manufacture and sale of wood products. It operates through three segments: Resource, Wood Products and Real Estate. Its primary objectives include using its timberland investments to generate income and maximizing the long-term value of its assets. Its Resource segment manages its timberlands. Its Wood Products segment manufactures and markets lumber, plywood and residual products at mills located in Arkansas, Idaho, Michigan and Minnesota. The activities of its Real Estate segment consist primarily of the sale of non-core timberlands in the categories of higher and better use (HBU), rural recreational real estate and non-strategic properties.

CatchMark Timber Trust Company Profile

CatchMark Timber Trust, Inc. is a real estate company investing in timberlands. The Company primarily engages in the ownership, management, acquisition and disposition of timberlands located in the United States. It is focused on investing in timberlands and to manage such assets to provide current income and attractive long-term returns to its stockholders. It owns all its properties and other investments through its operating partnership. The Company generates its income from the harvest and sale of timber, as well as from non-timber related revenue sources, such as recreational leases. In April 2014, the Company acquired 36,300 acres of timberland (known as the Waycross-Panola properties) located in Southeast Georgia and East Texas from Hancock Timber Resource Group. Approximately 55,600 acres of prime timberlands, known as Oglethorpe and Satilla River, add 2.7 million tons of timber to the Company’s merchantable inventory.

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