Critical Survey: Grow Capital (OTCMKTS:GRWC) versus Forestar Group (NYSE:FOR)

Grow Capital (OTCMKTS:GRWC) and Forestar Group (NYSE:FOR) are both small-cap finance companies, but which is the better business? We will contrast the two businesses based on the strength of their valuation, analyst recommendations, earnings, profitability, institutional ownership, dividends and risk.

Earnings & Valuation

This table compares Grow Capital and Forestar Group”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Grow Capital	$3.01 million	17.63	-$3.62 million	($0.03)	-11.60
Forestar Group	$1.66 billion	0.81	$167.90 million	$3.29	8.08

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

Profitability

This table compares Grow Capital and Forestar Group’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Grow Capital	-117.42%	N/A	N/A
Forestar Group	10.11%	10.08%	5.52%

Volatility and Risk

Grow Capital has a beta of 29.37, suggesting that its share price is 2,837% more volatile than the S&P 500. Comparatively, Forestar Group has a beta of 1.41, suggesting that its share price is 41% more volatile than the S&P 500.

Institutional & Insider Ownership

35.5% of Forestar Group shares are owned by institutional investors. 43.9% of Grow Capital shares are owned by insiders. Comparatively, 0.4% of Forestar Group shares are owned by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.

Analyst Recommendations

This is a summary of current recommendations and price targets for Grow Capital and Forestar Group, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Grow Capital	0	0	0	0	0.00
Forestar Group	0	3	4	0	2.57

Forestar Group has a consensus price target of $32.00, indicating a potential upside of 20.32%. Given Forestar Group’s stronger consensus rating and higher probable upside, analysts clearly believe Forestar Group is more favorable than Grow Capital.

Summary

Forestar Group beats Grow Capital on 11 of the 14 factors compared between the two stocks.

About Grow Capital

Grow Capital, Inc. operates in the financial technology sector. It provides software, technology, and services to financial services firms and advisors. The company's software suite delivers customized back office compliance, multi-pay commission processing, and new client application submission system, as well as digital engagement marketing services centric to financial services. It also provides software customization, licensing, and subscription service contracts, as well as ongoing customization and maintenance services; and ad hoc services, including web hosting, website development, and other complementary professional services. The company was incorporated in 1999 and is based in Henderson, Nevada.

About Forestar Group

Forestar Group Inc. operates as a residential lot development company in the United States. The company acquires land and develops infrastructure for single-family residential communities. It sells its residential single-family finished lots to local, regional, and national homebuilders. The company was incorporated in 2005 and is headquartered in Arlington, Texas. Forestar Group Inc. operates as a subsidiary of D.R. Horton, Inc.