Critical Review: PagSeguro Digital (PAGS) vs. Inovalon (INOV)

PagSeguro Digital (NYSE:PAGS) and Inovalon (NASDAQ:INOV) are both mid-cap business services companies, but which is the better investment? We will compare the two businesses based on the strength of their profitability, valuation, institutional ownership, risk, dividends, earnings and analyst recommendations.

Valuation and Earnings

This table compares PagSeguro Digital and Inovalon’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
PagSeguro Digital $790.32 million 3.64 $149.95 million $0.57 41.04
Inovalon $449.36 million 4.87 $34.81 million $0.23 62.43

PagSeguro Digital has higher revenue and earnings than Inovalon. PagSeguro Digital is trading at a lower price-to-earnings ratio than Inovalon, indicating that it is currently the more affordable of the two stocks.

Insider and Institutional Ownership

32.5% of Inovalon shares are held by institutional investors. 50.9% of Inovalon shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.

Profitability

This table compares PagSeguro Digital and Inovalon’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
PagSeguro Digital N/A N/A N/A
Inovalon -2.12% 4.12% 1.90%

Analyst Ratings

This is a summary of current ratings and recommmendations for PagSeguro Digital and Inovalon, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
PagSeguro Digital 1 3 8 0 2.58
Inovalon 0 2 0 0 2.00

PagSeguro Digital presently has a consensus price target of $33.47, indicating a potential upside of 43.10%. Inovalon has a consensus price target of $12.00, indicating a potential downside of 16.43%. Given PagSeguro Digital’s stronger consensus rating and higher possible upside, analysts clearly believe PagSeguro Digital is more favorable than Inovalon.

Summary

PagSeguro Digital beats Inovalon on 7 of the 13 factors compared between the two stocks.

PagSeguro Digital Company Profile

PagSeguro Digital Ltd. provides financial technology solutions and services for micro-merchants, and small and medium-sized businesses in Brazil and internationally. The company's products and services include PagSeguro Ecosystem, an end-to-end digital ecosystem that operates as a closed loop where its clients are able to address their primary day to day financial needs, including receiving and spending funds, and managing and growing their businesses; and Free PagSeguro digital account, which centralizes various cash-in options, functionalities, services, and cash-out options in a single ecosystem. It also acquires and sells point of sale (POS) devices and other products; and offers online gaming and cross-border digital services. In addition, the company offers functionalities, and value-added services and features, such as purchase protection mechanisms, antifraud platform, account and business management tools, eWallet, and its POS app. Further, it is involved in processing of back-office solutions, including sales reconciliation, and gateway solutions and services, as well as the capture of credit cards with administrators and acquirers. Additionally, the company engages in the in-person payment activities through POS devices; and issuance of prepaid cards to clients for spending or withdrawing account balances. It also provides online gaming and cross-border digital services; and operates an online platform that facilitates peer-to-peer lending. The company was founded in 2006 and is headquartered in São Paulo, Brazil. PagSeguro Digital Ltd. is a subsidiary of Universo Online S.A.

Inovalon Company Profile

Inovalon Holdings, Inc., a technology company, provides cloud-based platforms empowering a data-driven transformation from volume-based to value-based models in the healthcare industry. The company's platform enables the assessment and enhancement of clinical and quality outcomes and financial performance. It serves health plans and provider organizations, as well as pharmaceutical, medical device, and diagnostics companies. The company provides technology that supports approximately 500 healthcare organizations. Its platforms are informed by data pertaining to approximately 932,000 physicians; 455,000 clinical facilities; and approximately 240 million individuals and 37 billion medical events. Inovalon Holdings, Inc. was founded in 1998 and is headquartered in Bowie, Maryland.

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