Contrasting Kingsway Financial Services (NYSE:KWY) & Evertec (NYSE:EVTC)

Kingsway Financial Services (NYSE:KWY) and Evertec (NYSE:EVTC) are both small-cap finance companies, but which is the superior business? We will contrast the two businesses based on the strength of their earnings, profitability, institutional ownership, valuation, dividends, analyst recommendations and risk.

Institutional and Insider Ownership

72.4% of Kingsway Financial Services shares are owned by institutional investors. Comparatively, 96.8% of Evertec shares are owned by institutional investors. 41.4% of Kingsway Financial Services shares are owned by insiders. Comparatively, 1.1% of Evertec shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Profitability

This table compares Kingsway Financial Services and Evertec’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Kingsway Financial Services	-6.69%	-61.62%	-4.45%
Evertec	9.80%	32.07%	9.12%

Earnings & Valuation

This table compares Kingsway Financial Services and Evertec”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Kingsway Financial Services	$134.97 million	2.13	-$10.73 million	($0.30)	-33.07
Evertec	$996.16 million	1.90	$141.59 million	$1.54	20.53

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

Analyst Recommendations

This is a breakdown of recent ratings for Kingsway Financial Services and Evertec, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Kingsway Financial Services	1	0	0	0	1.00
Evertec	0	4	2	0	2.33

Evertec has a consensus target price of $35.00, indicating a potential upside of 10.72%. Given Evertec’s stronger consensus rating and higher probable upside, analysts plainly believe Evertec is more favorable than Kingsway Financial Services.

Risk & Volatility

Kingsway Financial Services has a beta of 0.25, suggesting that its share price is 75% less volatile than the S&P 500. Comparatively, Evertec has a beta of 0.72, suggesting that its share price is 28% less volatile than the S&P 500.

Summary

Evertec beats Kingsway Financial Services on 12 of the 14 factors compared between the two stocks.

About Kingsway Financial Services

Kingsway Financial Services Inc., through its subsidiaries, engages in the extended warranty business services, asset management, and real estate businesses. The company operates through three segments: Extended Warranty, Leased Real Estate, and Kingsway Search Xcelerator. The Extended Warranty segment markets, sells, and administers vehicle service agreements and related products for new and used automobiles, motorcycles, and ATVs. This segment also sells new home warranty products, as well as offers uninsured warrant administration services to homebuilders and homeowners; markets and distributes warranty products to manufacturers, distributors, and installers of heating, ventilation and air conditioning, standby generator, commercial LED lighting, and commercial refrigeration equipment; and provides equipment breakdown and maintenance support services to companies. The Leased Real Estate segment owns a parcel of real property consisting of approximately 192 acres located in the State of Texas. The Kingsway Search Xcelerator offers outsourced finance and human resources consulting services, including operational accounting, such as bookkeeping, accounting, financial reporting, and analysis and strategic finance services; technical accounting comprising initial public offerings, SEC reporting, and international consolidation services; human resources, workforce management, and compliance support services; and advisory services. The company offers its products and services through credit unions, dealers, homebuilders, and consumers. Kingsway Financial Services Inc. was incorporated in 1989 and is based in Itasca, Illinois.

About Evertec

EVERTEC, Inc. engages in transaction processing business and financial technology in Latin America and the Caribbean. The company operates through four segments: Payment Services – Puerto Rico & Caribbean; Latin America Payments and Solutions; Merchant Acquiring; and Business Solutions. It provides merchant acquiring services, which enable point of sales and e-commerce merchants to accept and process electronic methods of payment, such as debit, credit, prepaid, and electronic benefit transfer (EBT) cards. In addition, the company offers payment processing services that enable financial institutions and other issuers to manage, support, and facilitate the processing for credit, debit, prepaid, automated teller machines, and EBT card programs; credit and debit card processing, authorization and settlement, and fraud monitoring and control services to debit or credit issuers services. Further, it provides business process management solutions comprising core bank processing, network hosting and management, IT professional, business process outsourcing, item and cash processing, and fulfillment solutions to merchant, fintech, financial institutions, and corporate and government customers. Additionally, the company owns and operates the ATH network, a personal identification number debit networks. It manages a system of electronic payment networks that process approximately six billion transactions. The company sells and distributes its services primarily through direct sales force. It serves financial institutions, merchants, corporations, and government agencies. EVERTEC, Inc. was founded in 1988 and is headquartered in San Juan, Puerto Rico.