ExlService (NASDAQ: EXLS) and Nelnet (NYSE:NNI) are both mid-cap business services companies, but which is the better stock? We will compare the two businesses based on the strength of their analyst recommendations, profitability, earnings, risk, institutional ownership, dividends and valuation.

Analyst Ratings

This is a summary of current ratings for ExlService and Nelnet, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
ExlService 1 4 6 0 2.45
Nelnet 0 1 1 0 2.50

ExlService currently has a consensus price target of $61.82, indicating a potential upside of 5.17%. Nelnet has a consensus price target of $53.50, indicating a potential upside of 7.43%. Given Nelnet’s stronger consensus rating and higher possible upside, analysts clearly believe Nelnet is more favorable than ExlService.

Volatility & Risk

ExlService has a beta of 1.14, suggesting that its stock price is 14% more volatile than the S&P 500. Comparatively, Nelnet has a beta of 0.96, suggesting that its stock price is 4% less volatile than the S&P 500.

Dividends

Nelnet pays an annual dividend of $0.64 per share and has a dividend yield of 1.3%. ExlService does not pay a dividend. Nelnet pays out 12.1% of its earnings in the form of a dividend. ExlService has raised its dividend for 2 consecutive years.

Profitability

This table compares ExlService and Nelnet’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
ExlService 9.94% 14.81% 11.40%
Nelnet 17.51% 8.70% 0.71%

Institutional and Insider Ownership

92.0% of ExlService shares are owned by institutional investors. Comparatively, 39.9% of Nelnet shares are owned by institutional investors. 5.8% of ExlService shares are owned by insiders. Comparatively, 46.1% of Nelnet shares are owned by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock will outperform the market over the long term.

Valuation and Earnings

This table compares ExlService and Nelnet’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
ExlService $685.99 million 2.91 $61.73 million $2.11 27.86
Nelnet $1.24 billion 1.64 $256.75 million $5.29 9.41

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

Summary

ExlService beats Nelnet on 9 of the 17 factors compared between the two stocks.

About ExlService

ExlService Holdings, Inc. is an operations management and analytics company. The Company segments include Insurance; Healthcare; Travel, Transportation and Logistics; Finance and Accounting (F&A); Analytics, and All Other. The Insurance operating segment serves property and casualty insurance, life insurance, disability insurance, annuity and retirement services companies. The Healthcare operating segment serves healthcare payers and providers. The Travel, Transportation and Logistics operating segment primarily serves clients in the travel, transport and logistics industries. The F&A operating segment provides finance and accounting business process management (BPM) services across an array of F&A processes. The Analytics services focus on driving business outcomes for its customers by generating data-driven insights across all parts of its customers’ businesses. The All Other segment includes banking and financial services, utilities and consulting operating segments.

About Nelnet

Nelnet, Inc. focuses on delivering education-related products and services and student loan asset management. The Company is engaged in student loan servicing, tuition payment processing and school information systems, and communications. The Company’s segments include Loan Systems and Servicing, Tuition Payment Processing and Campus Commerce, Communications, Asset Generation and Management, and Corporate and Other Activities. The Company earns fee-based revenue through its Loan Systems and Servicing, Tuition Payment Processing, and Communications operating segments. In addition, the Company earns interest income on its student loan portfolio in its Asset Generation and Management operating segment. Corporate and Other Activities include real estate and other investments. The Company, through Allo Communications LLC, is engaged in the sale of advanced telecommunication services, including Internet, broadband, telephone, and television services.

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