Boise Cascade, L.L.C (BCC) and Enviva Partners LP (EVA) are two established players in the lumber industry. BCC is one of the biggest producers of engineered wood products (EWP) and plywood in North America. The company’s operations are divided into three segments: Wood Products, Building Materials Distribution, and Corporate and Others. EVA sells and produces utility graded wood pellets. It also supplies processed woody biomass fuels to power generation companies.
The housing industry boom has been driving the lumber industry since last year because home construction and renovation activities have been on an upswing. Lumber prices have tripled over the past year and are expected to continue rising. Because the Fed is still holding interest rates at near zero levels, rising high demand in the housing market and surging commodity prices should drive-up lumber prices to fresh highs soon.
While BCC has gained 103.8% over the past year, EVA has returned 54.2%. However, in terms of their past six months’ performance, BCC is a clear winner with 47.5% returns versus EVA’s 12.4% gains. But which of these two stocks is a better pick now? Let’s find out.
On May 7, BCC announced a $0.10 quarterly dividend per share. The dividend will be paid on June 15 to stockholders of record on June 1, 2021. This demonstrates the company’s commitment to periodic dividend pay-outs, making the stock appealing to fixed-income investors.
On March 30, EVA and Mitsui O.S.K. Lines (MOL) signed an agreement to develop and deploy an environmentally friendly bulk carrier. The agreement will help EVA to reduce its greenhouse gas emissions and meet benchmark standards.
Recent Financial Results
BCC’s revenue increased 56% year-over-year to $1.82 billion for the first quarter, ended March 31. The company’s operating income came in at $205.30 million, which represents a 703.5% year-over-year increase. Its net income was $149.20 million, up 1,122.6% year-over-year. And its EPS came in at $3.80, up 1,122.6% year over year.
For the first quarter, ended March 31, EVA’s sales were $241.04 million, which represents a 17.9% increase from the prior-year quarter. It incurred a net loss of $1.5 million during the same period.
Past and Expected Financial Performance
BCC’s revenue has increased at a 10.6% CAGR over the past five years. Analysts expect the company’s annual revenue to increase 60.5% for the quarter ending June 30 and 26% in 2021. Its EPS is expected to grow 394.1% for the current quarter, ending June 30, and 155.2% in its current fiscal year. In comparison, EVA’s revenue increased at a 15.2% CAGR over the past five years. Its annual revenue is expected to increase 45.8% for the quarter ending June 30, 2021 and 28% in its current fiscal year. The company’s EPS is expected to grow 82.1% in the quarter ending September 30, 2021 and 33.3% in its fiscal year 2022.
BCC’s trailing-12-month revenue is 6.72 times EVA’s. Also, BCC is more profitable, with a 5.1% net income margin versus EVA’s 0.87%.
BCC’s ROA and EBIT margins of 13.69% and 8.29%, respectively, compare favorably with EVA’s 0.56% and 7.69%.
Thus, BCC is more profitable.
In terms of forward EV/Sales, EVA is currently trading at 2.52x, 84.9% higher than BCC’s 0.38x. In terms of forward EV/EBITDA, EVA’s 11.41x is 67.4% higher than BCC’s 3.72x.
So, BCC is the more affordable stock.
EVA has an overall D rating, which equates to a Sell in our proprietary POWR Ratings system. However, BCC has an overall A rating, which represents a Strong Buy. The POWR Ratings are calculated by considering 118 different factors with the weighting of each optimized to improve overall performance.
EVA has a D grade for Value. This is justified given its higher-than-industry valuation ratios. In comparison, BCC has an A grade for Value. The company’s 0.38x forward EV/Sales is 81.1% lower than the 2.01x industry average.
EVA has a D grade for Quality. This is justified, owing to its negative trailing-12-month ROE margin. BCC has a B grade for Quality. Its trailing-12-month ROE of 36.62% is 275.9% higher than the 9.74% industry average.
Of the six stocks in the A-rated Industrial – Wood industry, EVA is ranked #6 and BCC is ranked #2.
In addition to the grades highlighted, we’ve rated both BCC and EVA for Sentiment, Quality, Momentum, and Stability as well. Click here to see the additional ratings for BCC. Also, get all of EVA’s ratings here.
The rising demand for infrastructure and real estate is increasing the demand for lumber, benefitting both BCC and EVA. However, BCC seems to be a better bet based on its relatively lower valuation and higher profit margin.
Our research shows that the odds of success increase if you bet on stocks with an Overall POWR Rating of Buy or Strong Buy. Click here to learn about top-rated stocks in the Industrial-Wood industry.
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BCC shares were trading at $65.07 per share on Wednesday afternoon, up $0.07 (+0.11%). Year-to-date, BCC has gained 36.40%, versus a 9.82% rise in the benchmark S&P 500 index during the same period.
About the Author: Ananyo Guha Niyogi
Ananyo’s ardent interest in capital markets, wealth management, and financial regulatory issues, led him to a career as an investment analyst. His goal is to educate individual investors by making complex financial issues easy to understand. More...
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