PFSweb (NASDAQ:PFSW) versus Newtek Business Services (NASDAQ:NEWT) Critical Survey

Newtek Business Services (NASDAQ:NEWTGet Rating) and PFSweb (NASDAQ:PFSWGet Rating) are both small-cap finance companies, but which is the better investment? We will contrast the two companies based on the strength of their institutional ownership, risk, profitability, earnings, dividends, analyst recommendations and valuation.

Profitability

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

Net Margins Return on Equity Return on Assets
Newtek Business Services 93.16% 18.95% 7.18%
PFSweb 50.16% -6.56% -3.72%

Institutional & Insider Ownership

25.2% of Newtek Business Services shares are held by institutional investors. Comparatively, 73.4% of PFSweb shares are held by institutional investors. 5.1% of Newtek Business Services shares are held by insiders. Comparatively, 8.4% of PFSweb shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company is poised for long-term growth.

Earnings and Valuation

This table compares Newtek Business Services and PFSweb’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Newtek Business Services $108.49 million 4.27 $84.14 million $2.75 6.97
PFSweb $277.30 million 1.00 $147.23 million $6.69 1.83

PFSweb has higher revenue and earnings than Newtek Business Services. PFSweb 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.

Analyst Ratings

This is a breakdown of current ratings for Newtek Business Services and PFSweb, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Newtek Business Services 1 0 0 0 1.00
PFSweb 0 0 1 0 3.00

PFSweb has a consensus price target of $13.00, suggesting a potential upside of 6.30%. Given PFSweb’s stronger consensus rating and higher possible upside, analysts clearly believe PFSweb is more favorable than Newtek Business Services.

Risk & Volatility

Newtek Business Services has a beta of 1.07, suggesting that its stock price is 7% more volatile than the S&P 500. Comparatively, PFSweb has a beta of 1.61, suggesting that its stock price is 61% more volatile than the S&P 500.

Summary

PFSweb beats Newtek Business Services on 9 of the 14 factors compared between the two stocks.

About Newtek Business Services (Get Rating)

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 Boca Raton, Florida with additional offices in Lake Success, New York, Garden City, New York; Miami, Florida; Milwaukee, Wisconsin; New Orleans, Louisiana; and New York, New York.

About PFSweb (Get Rating)

PFSweb, Inc., together with its subsidiaries, provides omni-channel commerce solutions in the United States, Belgium, Bulgaria, the United Kingdom, Canada, and India. The company offers order to cash service, which provides distributed order orchestration and payment processing; order fulfillment services; contact center services that are focused on providing essential services, such as order entry, returns authorization, product inquiry, and order tracking, as well as iCA, an application where agents provides customer service functions, such as placing orders, checking order status, facilitating returns, initiating upsell and cross sell, managing escalations, and gathering voice of the customer information. It serves clients in various industries, such as fashion apparel and accessories, fragrance and beauty products, health, luxury goods, cosmetics, footwear, consumer packaged goods, housewares, coins and collectibles, jewelry, computer and office products, and other industries. The company was incorporated in 1999 and is headquartered in Allen, Texas.

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