Analyzing Conduent (NYSE:CNDT) and NEWTEK Business Services (NYSE:NEWT)

NEWTEK Business Services (NASDAQ:NEWT) and Conduent (NYSE:CNDT) are both small-cap finance companies, but which is the better stock? We will contrast the two businesses based on the strength of their dividends, valuation, risk, earnings, profitability, institutional ownership and analyst recommendations.

Risk and Volatility

NEWTEK Business Services has a beta of 1.22, meaning that its share price is 22% more volatile than the S&P 500. Comparatively, Conduent has a beta of 1.85, meaning that its share price is 85% more volatile than the S&P 500.

Institutional and Insider Ownership

18.1% of NEWTEK Business Services shares are owned by institutional investors. Comparatively, 90.1% of Conduent shares are owned by institutional investors. 6.7% of NEWTEK Business Services shares are owned by company insiders. Comparatively, 0.9% of Conduent shares are owned by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Analyst Ratings

This is a summary of current ratings for NEWTEK Business Services and Conduent, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
NEWTEK Business Services 0 1 2 0 2.67
Conduent 0 5 3 0 2.38

NEWTEK Business Services presently has a consensus target price of $17.89, suggesting a potential downside of 21.31%. Conduent has a consensus target price of $12.64, suggesting a potential upside of 80.35%. Given Conduent’s higher possible upside, analysts plainly believe Conduent is more favorable than NEWTEK Business Services.

Profitability

This table compares NEWTEK Business Services and Conduent’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
NEWTEK Business Services 68.61% 9.87% 4.31%
Conduent -35.30% 6.35% 2.85%

Dividends

NEWTEK Business Services pays an annual dividend of $1.84 per share and has a dividend yield of 8.1%. Conduent does not pay a dividend. NEWTEK Business Services pays out 94.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. NEWTEK Business Services has increased its dividend for 3 consecutive years.

Earnings & Valuation

This table compares NEWTEK Business Services and Conduent’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
NEWTEK Business Services $49.51 million 8.80 $35.68 million $1.94 11.72
Conduent $5.39 billion 0.27 -$416.00 million $1.05 6.68

NEWTEK Business Services has higher earnings, but lower revenue than Conduent. Conduent is trading at a lower price-to-earnings ratio than NEWTEK Business Services, indicating that it is currently the more affordable of the two stocks.

Summary

NEWTEK Business Services beats Conduent on 11 of the 17 factors compared between the two stocks.

NEWTEK Business Services Company Profile

Newtek Business Services Corp. is a business development company specializing in providing financial and business services to the small-and medium-sized business market in the United States. The firm also seeks to invest in early stage businesses. The firm seeks to makes both debt and equity investments. Under debt investments, it focuses on first lien loans, which have terms of 1 to 25 years; second lien loans, which have terms of 5 to 25 years, and unsecured loans, which are provided to meet short-term funding needs and are repaid within 6 to 12 months. It operates through Electronic Payment Processing, Managed Technology Solutions, Small Business Finance, and Capcos segments. The company originates small business administration loans for the purpose of acquiring commercial real estate, machinery, equipment, and inventory, as well as to refinance debt and fund franchises, working capital, and business acquisitions; and offers small business loan servicing and consulting services to the Federal Deposit Insurance Corporation and various other financial institutions, as well as provides management services. Its electronic payment processing services include credit and debit card processing, check approval, ancillary processing equipment and software to merchants, eCommerce, electronic solutions to accept non-cash payments, check conversion, remote deposit capture, ACH processing, and electronic gift and loyalty card programs. The company also provides Website hosting, dedicated server, and cloud hosting services; Web design and development; Internet marketing; data storage and backup and other related services; and ecommerce services, such as payment processing, online shopping cart tools, Website design and Web related services; Accounts Receivable Financing, and The Secure Gateway. In addition, it offers Newtek Advantage, a mobile, real-time operating platform enabling a business to access data on a smartphone, tablet, laptop, or PC for eCommerce, credit/debit transactions, Website statistics, payroll, insurance, and business loans. Further, the company sells personal, commercial, and health/benefits lines of insurance products; and payroll management processing and employee tax filing services. It has strategic alliances with American International Group, CTAA, Navy Federal Credit Union, Credit Union National Association, Pershing, and others to provide agent services to small business clients. The firm seeks to invest in New York and Louisiana area. The firm seeks to invest $0.3 million to $3 million in businesses. It provides small business terms loans ranging from $0.05 million to $10 million. The firm also provides account receivable financing ranging from $0.05 million to $1.5 million. It also provides $0.05 million to $10 million financing to owner occupied real estate businesses whose average net income over the last 2 years must not exceed $2.5 million. Newtek Business Services Corp., formerly known as Newtek Business Services Inc., was incorporated on August 26, 2013 and is headquartered in Lake Success, New York with additional offices in Garden City, New York; Miami, Florida; Milwaukee, Wisconsin; New Orleans, Louisiana; and New York, New York.

Conduent Company Profile

Conduent Incorporated provides business process services with capabilities in transaction-intensive processing, analytics, and automation in the United States and Europe. It operates through three segments: Commercial Industries, Government Services, and Transportation. The Commercial Industries segment offers business process services and customized solutions to clients in various industries. This segment delivers end-to-end business-to-business and business-to-customer services, including customer care, human resource management, omni-channel communications, and finance and accounting services that enable its clients to optimize their processes. It also provides industry-specific services, such as personalized product information for the automotive industry; digitized source-to-pay solutions for clients in the manufacturing industry; customer experience and marketing services for clients in the retail industry; mortgage and consumer loan processing for clients in the financial services industry; and customized workforce learning solutions for clients in the aerospace industry. The Government Services segment provides government-centric business process services to the United States federal, state, local, and foreign governments for transportation, public assistance, program administration, transaction processing, and payment services. The Transportation segment provides support for electronic toll collection, public transit, parking, and photo enforcement service to transportation departments and agencies worldwide. It also offers payment services comprising prepaid cards, health savings accounts, and child support payments; customer care services; human resources services; finance and accounting services; legal business services; workforce learning services; and applied automation and analytics solutions. The company is headquartered in Florham Park, New Jersey.

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