Resources Connection (NASDAQ: RECN) and Mistras Group (NYSE:MG) are both small-cap business services companies, but which is the better investment? We will contrast the two businesses based on the strength of their risk, earnings, analyst recommendations, dividends, profitability, institutional ownership and valuation.

Analyst Recommendations

This is a breakdown of recent ratings and recommmendations for Resources Connection and Mistras Group, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Resources Connection 2 1 0 0 1.33
Mistras Group 1 6 1 0 2.00

Resources Connection currently has a consensus target price of $14.67, indicating a potential downside of 9.74%. Mistras Group has a consensus target price of $34.57, indicating a potential upside of 68.97%. Given Mistras Group’s stronger consensus rating and higher possible upside, analysts plainly believe Mistras Group is more favorable than Resources Connection.

Risk & Volatility

Resources Connection has a beta of 1.21, meaning that its share price is 21% more volatile than the S&P 500. Comparatively, Mistras Group has a beta of 1.18, meaning that its share price is 18% more volatile than the S&P 500.

Dividends

Resources Connection pays an annual dividend of $0.48 per share and has a dividend yield of 3.0%. Mistras Group does not pay a dividend. Resources Connection pays out 82.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Profitability

This table compares Resources Connection and Mistras Group’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Resources Connection 2.98% 8.25% 5.53%
Mistras Group 0.68% 6.16% 3.48%

Institutional and Insider Ownership

77.8% of Resources Connection shares are held by institutional investors. Comparatively, 62.0% of Mistras Group shares are held by institutional investors. 11.8% of Resources Connection shares are held by company insiders. Comparatively, 44.7% of Mistras Group shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Earnings and Valuation

This table compares Resources Connection and Mistras Group’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Resources Connection $583.41 million 0.87 $18.65 million $0.58 28.02
Mistras Group $719.18 million 0.80 $24.65 million $0.14 146.15

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

About Resources Connection

Resources Connection, Inc. is a multinational consulting firm. The Company’s operating entities primarily provide services under the name Resources Global Professionals (RGP). The Company provides consulting and business initiative support services to its global client base in the areas of accounting; finance; corporate governance, risk and compliance (GRC) management; corporate advisory, strategic communications and restructuring; information management; human capital; supply chain management, and legal and regulatory. The Company provides its services and solutions to a client base in a range of industries. Its finance and accounting services encompass accounting operations, financial reporting, internal controls, financial analyses and business transactions. It offers a range of technology solutions, which include enterprise resource planning systems; strategic front-of-the-house systems; human resources (HR) information systems, and supply chain management systems, among others.

About Mistras Group

Mistras Group, Inc. offers asset protection solutions and is a provider of technology-enabled asset protection solutions used to evaluate the structural integrity and reliability of critical energy, industrial and public infrastructure. The Company’s segments are Services segment, which provides asset protection solutions in North America with concentration on the United States along with a Canadian services business, consisting of non-destructive testing, and inspection and engineering services that are used to evaluate structural integrity and reliability of critical energy, industrial and public infrastructure; International segment, which offers services, products and systems similar to those of its Services and Products and Systems segments to markets in Europe, the Middle East, Africa, Asia and South America, and Products and Systems segment, which designs, manufactures, sells, installs and services asset protection products and systems, including equipment and instrumentation.

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