Innodata (NASDAQ:INOD) and PDF Solutions (NASDAQ:PDFS) Critical Review

Innodata (NASDAQ:INOD) and PDF Solutions (NASDAQ:PDFS) are both small-cap computer and technology companies, but which is the better business? We will compare the two businesses based on the strength of their risk, earnings, profitability, dividends, valuation, analyst recommendations and institutional ownership.

Analyst Recommendations

This is a breakdown of current ratings and recommmendations for Innodata and PDF Solutions, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Innodata	0	0	5	0	3.00
PDF Solutions	0	1	2	0	2.67

Innodata presently has a consensus target price of $55.00, indicating a potential upside of 38.96%. PDF Solutions has a consensus target price of $33.3333, indicating a potential upside of 69.89%. Given PDF Solutions’ higher probable upside, analysts clearly believe PDF Solutions is more favorable than Innodata.

Profitability

This table compares Innodata and PDF Solutions’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Innodata	18.71%	54.27%	32.29%
PDF Solutions	0.44%	4.22%	2.98%

Institutional & Insider Ownership

30.8% of Innodata shares are held by institutional investors. Comparatively, 79.5% of PDF Solutions shares are held by institutional investors. 15.2% of Innodata shares are held by company insiders. Comparatively, 11.1% of PDF Solutions shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.

Valuation and Earnings

This table compares Innodata and PDF Solutions”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Innodata	$170.46 million	7.40	$28.66 million	$1.24	31.92
PDF Solutions	$179.46 million	4.32	$4.06 million	$0.02	981.00

Innodata has higher earnings, but lower revenue than PDF Solutions. Innodata is trading at a lower price-to-earnings ratio than PDF Solutions, indicating that it is currently the more affordable of the two stocks.

Risk & Volatility

Innodata has a beta of 2.75, meaning that its stock price is 175% more volatile than the S&P 500. Comparatively, PDF Solutions has a beta of 1.4, meaning that its stock price is 40% more volatile than the S&P 500.

Summary

Innodata beats PDF Solutions on 10 of the 14 factors compared between the two stocks.

About Innodata

Innodata Inc. operates as a global data engineering company in the United States, the United Kingdom, the Netherlands, Canada, and internationally. The company operates through three segments: Digital Data Solutions (DDS), Synodex, and Agility. The DDS segment engages in the provision of artificial intelligence (AI) data preparation services; collecting or creating training data; annotating training data; and training AI algorithms for its customers, as well as AI model deployment and integration services. This segment also provides a range of data engineering support services, including data transformation, data curation, data hygiene, data consolidation, data extraction, data compliance, and master data management. The Synodex segment offers an industry platform that transforms medical records into useable digital data with its proprietary data models or client data models. The Agility segment provides an industry platform that offers marketing communications and public relations professionals to target and distribute content to journalists and social media influencers; and to monitor and analyze global news channels, such as print, web, radio, and TV, as well as social media channels. It serves banking, insurance, financial services, technology, digital retailing, and information/media sectors through its professional staff, senior management, and direct sales personnel. The company was formerly known as Innodata Isogen, Inc. and changed its name to Innodata Inc. in June 2012. Innodata Inc. was incorporated in 1988 and is headquartered in Ridgefield Park, New Jersey.

About PDF Solutions

PDF Solutions, Inc. provides proprietary software and physical intellectual property products for integrated circuit designs, electrical measurement hardware tools, proven methodologies, and professional services in the United States, China, Japan, and internationally. The company offers Exensio software products, such as Manufacturing Analytics that store collected data in a common environment with a consistent view for enabling product engineers to identify and analyze production yield, performance, reliability, and other issues; Process Control that provides failure detection and classification capabilities for monitoring, alarming, and controlling manufacturing tool sets; Test Operations that offer data collection and analysis capabilities; and Assembly Operations that provide device manufacturers with the capability to link assembly and packaging data, including fabrication and characterization data over the product life cycle. It also provides Design-For-Inspection (DFI) systems, such as DFI On-Chip Instruments; eProbe Non-Contact E-Beam Tool; and Characterization Vehicle (CV) system, which includes CV Test Chips and pdFasTest Electrical Testers, as well as Exensio characterization software, designed to analyze the measurements collected using the eProbe tool. In addition, the company offers Cimetrix software products that enables equipment manufacturers to provide industry standard interfaces on their products; and software-as-a-service, software related services, and characterization services. It sells its technologies and services through direct sales force, service teams, and strategic alliances to integrated device manufacturers, fabless semiconductor companies, foundries, equipment manufacturers, electronics manufacturing suppliers, original device manufacturers, out-sourced semiconductor assembly and test, and system houses. PDF Solutions, Inc. was founded in 1991 and is headquartered in Santa Clara, California.