NEWTEK Business Services (NEWT) vs. Healthequity (HQY) Head-To-Head Survey

NEWTEK Business Services (NASDAQ:NEWT) and Healthequity (NASDAQ:HQY) are both finance companies, but which is the superior investment? We will compare the two businesses based on the strength of their analyst recommendations, earnings, institutional ownership, dividends, profitability, risk and valuation.

Insider and Institutional Ownership

20.2% of NEWTEK Business Services shares are owned by institutional investors. Comparatively, 95.5% of Healthequity shares are owned by institutional investors. 6.3% of NEWTEK Business Services shares are owned by company insiders. Comparatively, 4.0% of Healthequity shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Volatility & Risk

NEWTEK Business Services has a beta of 1.4, suggesting that its stock price is 40% more volatile than the S&P 500. Comparatively, Healthequity has a beta of 1.72, suggesting that its stock price is 72% more volatile than the S&P 500.

Earnings & Valuation

This table compares NEWTEK Business Services and Healthequity’s gross 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 7.75 $35.68 million $1.94 10.47
Healthequity $229.52 million 22.21 $47.36 million $0.54 151.30

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

Dividends

NEWTEK Business Services pays an annual dividend of $2.00 per share and has a dividend yield of 9.8%. Healthequity does not pay a dividend. NEWTEK Business Services pays out 103.1% 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 raised its dividend for 3 consecutive years.

Analyst Ratings

This is a summary of current recommendations for NEWTEK Business Services and Healthequity, 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
Healthequity 0 2 10 0 2.83

NEWTEK Business Services presently has a consensus target price of $17.89, indicating a potential downside of 11.90%. Healthequity has a consensus target price of $89.67, indicating a potential upside of 9.75%. Given Healthequity’s stronger consensus rating and higher possible upside, analysts clearly believe Healthequity is more favorable than NEWTEK Business Services.

Profitability

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

Net Margins Return on Equity Return on Assets
NEWTEK Business Services 72.06% 9.05% 4.41%
Healthequity 24.52% 12.42% 11.79%

Summary

Healthequity beats NEWTEK Business Services on 12 of the 17 factors compared between the two stocks.

About NEWTEK Business Services

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.

About Healthequity

HealthEquity, Inc. provides various solutions for managing health care accounts, health reimbursement arrangements, and flexible spending accounts for health plans, insurance companies, and third-party administrators in the United States. The company offers healthcare saving and spending platform, a cloud-based platform for individuals to make health saving and spending decisions, pay healthcare bills, compare treatment options and prices, receive personalized benefit and clinical information, earn wellness incentives, grow their savings, and make investment choices; and health savings accounts. It also provides mutual fund investment platform; and online-only investment advisory services through Advisor, a Web-based tool. In addition, the company offers health reimbursement and flexible spending arrangements solutions; and Employee Retirement Income Security Act's plan administration and investment services. HealthEquity, Inc. was founded in 2002 and is headquartered in Draper, Utah.

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