ReachLocal (NASDAQ: RLOC) and Marchex (NASDAQ:MCHX) are both cyclical consumer goods & services companies, but which is the superior investment? We will contrast the two companies based on the strength of their profitabiliy, earnings, dividends, analyst recommendations, risk, valuation and institutional ownership.

Analyst Recommendations

This is a breakdown of current recommendations and price targets for ReachLocal and Marchex, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
ReachLocal 0 0 0 0 N/A
Marchex 0 1 0 0 2.00

Marchex has a consensus price target of $3.00, suggesting a potential upside of 3.45%. Given Marchex’s higher probable upside, analysts plainly believe Marchex is more favorable than ReachLocal.

Risk & Volatility

ReachLocal has a beta of -0.18, suggesting that its share price is 118% less volatile than the S&P 500. Comparatively, Marchex has a beta of 1.16, suggesting that its share price is 16% more volatile than the S&P 500.

Profitability

This table compares ReachLocal and Marchex’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
ReachLocal -5.20% N/A -15.27%
Marchex -71.14% -13.17% -11.58%

Insider and Institutional Ownership

52.0% of Marchex shares are held by institutional investors. 27.4% of Marchex shares are held by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.

Valuation & Earnings

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

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
ReachLocal N/A N/A N/A ($1.66) -2.77
Marchex $117.94 million 0.94 -$16.06 million ($2.01) -1.44

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

Summary

Marchex beats ReachLocal on 6 of the 9 factors compared between the two stocks.

ReachLocal Company Profile

ReachLocal, Inc. (ReachLocal) offers a range of online marketing and reporting solutions. The Company’s digital marketing solution consists of products and solutions in three categories: digital advertising (including ReachSearch, ReachDisplay, ReachDisplay InApp and ReachRetargeting); Web presence (including ReachSite+ReachEdge, ReachSEO, ReachCast, ReachListings and TotalLiveChat), and software (ReachEdge and Kickserv). It focuses on small to medium-sized businesses (SMBs). The Company delivers its suite of products and solutions to local businesses through a combination of its technology platform, its direct inside and outside sales force, and select third-party agencies and resellers. It also focuses on certain core verticals, which include home services, professional services, specialty services and healthcare. It also provides solutions to multi-location advertisers, such as franchises and other businesses that have multiple locations across a number of cities and states.

Marchex Company Profile

Marchex, Inc. is a mobile advertising analytics company. The Company offers products and services for enterprises that depend on consumer phone calls to drive sales. Its media analytics products can provide actionable intelligence on media channels advertisers use to acquire customers over the phone. Its Marchex Omnichannel Analytics Cloud helps marketers connect customer conversions driven from paid media channels, including search, display and video, social and sites, to phone calls made to a business. Its product offerings include Marchex Call Analytics, Marchex Search Analytics, Marchex Display and Video Analytics, Marchex Social Analytics, Marchex Call Marketplace and Local Leads. Its Local Leads platform is a white-labeled, full service advertising solution for small business resellers, such as Yellow Pages providers and vertical marketing service providers, to sell call advertising, search marketing and other lead generation products.

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