Analyzing Formula Systems (1985) (NASDAQ:FORTY) & Innodata (NASDAQ:INOD)

Formula Systems (1985) (NASDAQ:FORTY) and Innodata (NASDAQ:INOD) are both computer and technology companies, but which is the better stock? We will contrast the two businesses based on the strength of their profitability, earnings, analyst recommendations, dividends, institutional ownership, valuation and risk.

Profitability

This table compares Formula Systems (1985) and Innodata’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Formula Systems (1985)	2.70%	5.58%	2.58%
Innodata	18.71%	54.27%	32.29%

Volatility and Risk

Formula Systems (1985) has a beta of 0.94, meaning that its share price is 6% less volatile than the S&P 500. Comparatively, Innodata has a beta of 2.58, meaning that its share price is 158% more volatile than the S&P 500.

Valuation & Earnings

This table compares Formula Systems (1985) and Innodata”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Formula Systems (1985)	$2.76 billion	0.81	$79.67 million	$4.97	29.15
Innodata	$228.14 million	8.73	$28.66 million	$1.24	50.45

Formula Systems (1985) has higher revenue and earnings than Innodata. Formula Systems (1985) is trading at a lower price-to-earnings ratio than Innodata, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a breakdown of current ratings for Formula Systems (1985) and Innodata, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Formula Systems (1985)	0	0	0	0	0.00
Innodata	0	0	5	0	3.00

Innodata has a consensus target price of $55.00, indicating a potential downside of 12.08%. Given Innodata’s stronger consensus rating and higher probable upside, analysts plainly believe Innodata is more favorable than Formula Systems (1985).

Institutional & Insider Ownership

34.8% of Formula Systems (1985) shares are owned by institutional investors. Comparatively, 30.8% of Innodata shares are owned by institutional investors. 23.3% of Formula Systems (1985) shares are owned by company insiders. Comparatively, 12.2% of Innodata shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Summary

Innodata beats Formula Systems (1985) on 9 of the 14 factors compared between the two stocks.

About Formula Systems (1985)

Formula Systems (1985) Ltd., through its subsidiaries, provides proprietary and non-proprietary software solutions, IT professional services, software product marketing and support, computer infrastructure and integration solutions, and learning and integration worldwide. The company offers computer and telecommunication infrastructure solutions; and sells and markets computers and peripheral equipment, and cloud based solutions and services relating to databases and big data. It also provides customer relations management, computer systems management infrastructures, web world content management, database and data warehouse mining, application integration, database and systems, data management, and software development tools; and application and professional training courses, and advanced professional studies. In addition, the company offers property and casualty insurance platforms, such as Sapiens, Sapiens CoreSuite, Sapiens IDITSuite, and IDIT Go; life, pension, and annuities platforms, including Sapiens, Sapiens CoreSuite, Sapiens UnderwritingPro, Sapiens ApplicationPro, Sapiens IllustrationPro, and Sapiens ConsolidationMaster; Sapiens Cloud-based DigitalSuite; data and analytics platform; and reinsurance software solutions comprising Sapiens ReinsuranceMaster, Sapiens ReinsurancePro, and Sapiens Reinsurance GO. Further, it provides Sapiens workers' compensation solutions; Sapiens medical professional liability solutions; financial and compliance solutions, such as Sapiens FinancialPro, Sapiens Financial GO, Sapiens StatementPro, Sapiens CheckPro, and Sapiens Reporting Tools; Sapiens Decision; and technology-based solutions. Additionally, it offers application development and business process integration platforms; vertical software solutions; strategic consulting and outsourcing services; and professional services in various areas, as well as develops on-premise payroll software. The company was incorporated in 1985 and is headquartered in Or Yehuda, Israel.

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.