Financial Review: NEWTEK Business Services (NASDAQ:NEWT) and B. Riley Financial (NASDAQ:RILY)


NEWTEK Business Services (NASDAQ:NEWT) and B. Riley Financial (NASDAQ:RILY) are both small-cap finance companies, but which is the better business? We will compare the two companies based on the strength of their risk, analyst recommendations, institutional ownership, earnings, valuation, dividends and profitability.

Insider & Institutional Ownership

17.1% of NEWTEK Business Services shares are owned by institutional investors. Comparatively, 50.7% of B. Riley Financial shares are owned by institutional investors. 6.7% of NEWTEK Business Services shares are owned by insiders. Comparatively, 24.6% of B. Riley Financial shares are owned by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Dividends

NEWTEK Business Services pays an annual dividend of $2.32 per share and has a dividend yield of 9.9%. B. Riley Financial pays an annual dividend of $0.70 per share and has a dividend yield of 2.4%. NEWTEK Business Services pays out 119.6% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Risk & Volatility

NEWTEK Business Services has a beta of 1.21, suggesting that its share price is 21% more volatile than the S&P 500. Comparatively, B. Riley Financial has a beta of 0.92, suggesting that its share price is 8% less volatile than the S&P 500.

Profitability

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

Net Margins Return on Equity Return on Assets
NEWTEK Business Services 61.37% 14.42% 6.11%
B. Riley Financial 9.45% 27.38% 3.78%

Analyst Recommendations

This is a breakdown of recent ratings and target prices for NEWTEK Business Services and B. Riley Financial, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
NEWTEK Business Services 0 2 1 0 2.33
B. Riley Financial 0 0 0 0 N/A

NEWTEK Business Services presently has a consensus target price of $17.89, indicating a potential downside of 23.43%. Given NEWTEK Business Services’ higher probable upside, equities analysts plainly believe NEWTEK Business Services is more favorable than B. Riley Financial.

Earnings and Valuation

This table compares NEWTEK Business Services and B. Riley Financial’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 9.35 $35.68 million $1.94 12.05
B. Riley Financial $422.99 million 1.86 $15.51 million N/A N/A

NEWTEK Business Services has higher earnings, but lower revenue than B. Riley Financial.

Summary

NEWTEK Business Services beats B. Riley Financial on 9 of the 14 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 B. Riley Financial

B. Riley Financial, Inc., through its subsidiaries, provides collaborative financial services and solutions in North America, Australia, and Europe. The company operates in four segments: Capital Markets, Auction and Liquidation, Valuation and Appraisal, and Principal Investments – United Online and magicJack. It offers investment banking services, including merger and acquisitions, restructuring advisory, initial and secondary public offerings, and institutional private placements; and corporate finance, research, securities lending, wealth management, and sales and trading services to corporate, institutional, and high net worth clients. The company also provides retail store liquidation, and wholesale and industrial assets disposition services; valuation and appraisal services to financial institutions, lenders, private equity firms, and other providers of capital; and consumer subscription services consisting of Internet access services and devices under the NetZero and Juno brands, as well as voice over IP cloud-based technology and communication services. In addition, it offers advisory services to private funds, and institutional and high net worth investors; multi-family office practice and wealth management services to ultra-high net worth individuals and families; and senior secured and second lien secured loans to middle market public and the private U.S. companies. The company was formerly known as Great American Group, Inc. and changed its name to B. Riley Financial, Inc. in November 2014. B. Riley Financial, Inc. was founded in 1973 and is headquartered in Woodland Hills, California.

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