Convergys (CVG) & Simulations Plus (SLP) Critical Survey

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Convergys (NASDAQ: SLP) and Simulations Plus (NASDAQ:SLP) are both business services companies, but which is the superior stock? We will contrast the two companies based on the strength of their dividends, risk, earnings, profitability, valuation, analyst recommendations and institutional ownership.

Institutional & Insider Ownership

34.3% of Simulations Plus shares are owned by institutional investors. 1.7% of Convergys shares are owned by company insiders. Comparatively, 33.5% of Simulations Plus shares are owned 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.

Profitability

This table compares Convergys and Simulations Plus’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Convergys 3.24% 12.03% 7.02%
Simulations Plus 29.88% 25.65% 17.87%

Analyst Ratings

This is a breakdown of recent recommendations and price targets for Convergys and Simulations Plus, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Convergys 0 4 0 0 2.00
Simulations Plus 0 0 0 0 N/A

Convergys currently has a consensus target price of $26.83, suggesting a potential upside of 9.30%. Given Convergys’ higher possible upside, equities research analysts clearly believe Convergys is more favorable than Simulations Plus.

Volatility & Risk

Convergys has a beta of 0.9, indicating that its stock price is 10% less volatile than the S&P 500. Comparatively, Simulations Plus has a beta of -0.85, indicating that its stock price is 185% less volatile than the S&P 500.

Earnings & Valuation

This table compares Convergys and Simulations Plus’ top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Convergys $2.79 billion 0.80 $121.40 million $1.87 13.13
Simulations Plus $24.14 million 13.81 $5.78 million $0.34 56.47

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

Dividends

Convergys pays an annual dividend of $0.44 per share and has a dividend yield of 1.8%. Simulations Plus pays an annual dividend of $0.24 per share and has a dividend yield of 1.3%. Convergys pays out 23.5% of its earnings in the form of a dividend. Simulations Plus pays out 70.6% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Convergys has raised its dividend for 5 consecutive years. Convergys is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

Convergys beats Simulations Plus on 8 of the 15 factors compared between the two stocks.

About Convergys

Convergys Corporation provides customer management services to communications and media, technology, financial services, retail, healthcare, government, travel and hospitality, and other vertical markets worldwide. The company offers solutions across the customer lifecycle, including sales, customer service, technical support, customer retention, and collection, as well as security, compliance, and fraud solutions; and solutions in contact center technology comprising omni-channel interaction, cross-channel integration framework, real-time decisioning engine, robotic process automation, intelligent notification, campaign management, personalized care, personalized selling, agent productivity, and retention solutions. It also provides analytics and consulting, and software solutions, such as enterprise feedback management, integrated customer experience analytics, post-contact surveys, relational loyalty research, customer segmentation and profiling, call elimination analysis, analysis of customer effort, digital channel optimization, and integrated contact center analytics solutions, as well as voice of customer software. The company operates through 140 contact centers. Convergys Corporation was founded in 1998 and is headquartered in Cincinnati, Ohio.

About Simulations Plus

Simulations Plus, Inc. develops drug discovery and development software for mechanistic modeling and simulation worldwide. The company offers GastroPlus, which simulates the absorption, pharmacokinetics (PK), and pharmacodynamics of drugs administered to humans and animals; DDDPlus that simulates in vitro laboratory experiments, which measure the rate of dissolution of the drug and additives in a dosage form; and MembranePlus, which simulates laboratory experiments. It also provides PKPlus, a standalone program that provides the functionality needed by pharmaceutical industry scientists to perform the analyses and generate the outputs needed to satisfy regulatory agency requirements for NCA and compartmental PK modelling; ADMET Predictor, a chemistry-based computer program, which takes molecular structures as inputs and predicts their properties; and MedChem Designer, a molecule drawing program or sketcher that integrates with MedChem Studio and ADMET Predictor. In addition, it offers MedChem Studio, a software tool for data mining and designing new molecules; KIWI, a cloud-based Web application, which organizes, processes, maintains, and communicates the volume of data and results generated by pharmacologists and scientists over the duration of a drug development program; DILIsym, a quantitative systems pharmacology software; and DILIsym, a software that is used to investigate the likelihood that a known drug molecule would cause injury to the liver. Further, the company provides consulting services ranging from early drug discovery through preclinical and clinical trial data analysis, and for submissions to regulatory agencies; and population modeling and simulation contract research services for the pharmaceutical and biotechnology industries. Additionally, it offers its pharmaceutical/chemistry software to pharmaceutical, biotechnology, agrochemical, and food companies. Simulations Plus, Inc. was founded in 1996 and is headquartered in Lancaster, California.

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