Financial Review: Leaf Group (LFGR) versus Connecture (CNXR)

Leaf Group (NYSE: LFGR) and Connecture (OTCMKTS:CNXR) are both small-cap computer and technology companies, but which is the better investment? We will contrast the two companies based on the strength of their risk, earnings, analyst recommendations, institutional ownership, valuation, dividends and profitability.

Volatility & Risk

Leaf Group has a beta of 0.73, suggesting that its stock price is 27% less volatile than the S&P 500. Comparatively, Connecture has a beta of 1.8, suggesting that its stock price is 80% more volatile than the S&P 500.

Earnings & Valuation

This table compares Leaf Group and Connecture’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio NetIncome Earnings Per Share Price/Earnings Ratio
Leaf Group $113.45 million 1.38 -$2.01 million ($1.58) -4.75
Connecture $81.89 million 0.07 -$26.53 million ($0.92) -0.27

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

Analyst Recommendations

This is a summary of current ratings and recommmendations for Leaf Group and Connecture, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Leaf Group 0 1 4 0 2.80
Connecture 0 0 0 0 N/A

Leaf Group presently has a consensus target price of $10.30, suggesting a potential upside of 37.33%. Given Leaf Group’s higher probable upside, equities analysts clearly believe Leaf Group is more favorable than Connecture.

Institutional & Insider Ownership

63.3% of Leaf Group shares are held by institutional investors. Comparatively, 38.8% of Connecture shares are held by institutional investors. 47.6% of Leaf Group shares are held by company insiders. Comparatively, 58.1% of Connecture shares are held by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company will outperform the market over the long term.

Profitability

This table compares Leaf Group and Connecture’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Leaf Group -25.98% -44.59% -34.40%
Connecture -19.38% N/A -17.70%

About Leaf Group

Leaf Group Ltd., formerly Demand Media, Inc., is diversified Internet marketplaces and media company. The Company has online media properties and marketplace platforms that enable communities of creators to reach audiences in lifestyle categories. The Company operates an online studio platform for the professional creation and distribution of content, as well as two online artist marketplaces. Its business comprises two service offerings: Content & Media and Marketplaces. The Company creates media content, including text articles, videos, photographs and designed visual formats, and publishes such content to its owned and operated online properties and to its customers’ online properties. The Company also offers its content creation and distribution platform to provide custom content and other content marketing solutions to brands, publishers and advertisers.

About Connecture

Connecture, Inc. provides a Web-based consumer shopping, enrollment and retention platform for health insurance distribution. The Company caters its services to health insurance marketplace operators, such as health plans, brokers and exchange operators. It operates through four segments: Enterprise/Commercial, Enterprise/State, Medicare and Private Exchange. The Enterprise/Commercial segment offers insurance distribution solutions to health plans. The Enterprise/State segment offers the sales automation solutions to state Governments, which allow its customers to offer customized individual and small group exchanges. The Medicare segment offers Web-based Medicare plan comparison, prescription drug comparison and enrollment tools for health plans, pharmacy benefit managers, pharmacies, field marketing organizations and call centers. The Private Exchange segment offers defined-contribution benefit exchange solutions to benefit consultants, brokers, exchange operators and aggregators.

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