Pegasystems (NASDAQ:PEGA) and Inovalon (NASDAQ:INOV) are both mid-cap computer and technology companies, but which is the better investment? We will compare the two businesses based on the strength of their dividends, valuation, profitability, earnings, risk, institutional ownership and analyst recommendations.
Analyst Recommendations
This is a breakdown of current ratings and price targets for Pegasystems and Inovalon, as reported by MarketBeat.com.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score |
|---|
| Pegasystems | 0 | 1 | 13 | 0 | 2.93 |
| Inovalon | 1 | 3 | 5 | 0 | 2.44 |
Pegasystems presently has a consensus price target of $145.50, suggesting a potential upside of 20.17%. Inovalon has a consensus price target of $25.7778, suggesting a potential upside of 1.25%. Given Pegasystems' stronger consensus rating and higher possible upside, research analysts clearly believe Pegasystems is more favorable than Inovalon.
Profitability
This table compares Pegasystems and Inovalon's net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets |
|---|
| Pegasystems | -6.48% | -19.29% | -7.77% |
| Inovalon | 0.87% | 9.07% | 3.18% |
Institutional & Insider Ownership
47.9% of Pegasystems shares are owned by institutional investors. Comparatively, 33.6% of Inovalon shares are owned by institutional investors. 51.9% of Pegasystems shares are owned by company insiders. Comparatively, 49.6% of Inovalon shares are owned by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock is poised for long-term growth.
Earnings and Valuation
This table compares Pegasystems and Inovalon's gross revenue, earnings per share and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio |
|---|
| Pegasystems | $911.38 million | 10.75 | $-90,430,000.00 | ($1.25) | -96.86 |
| Inovalon | $642.41 million | 6.16 | $7.78 million | $0.41 | 62.10 |
Inovalon has lower revenue, but higher earnings than Pegasystems. Pegasystems is trading at a lower price-to-earnings ratio than Inovalon, indicating that it is currently the more affordable of the two stocks.
Risk & Volatility
Pegasystems has a beta of 1.24, suggesting that its stock price is 24% more volatile than the S&P 500. Comparatively, Inovalon has a beta of 0.64, suggesting that its stock price is 36% less volatile than the S&P 500.
Summary
Pegasystems beats Inovalon on 8 of the 14 factors compared between the two stocks.
