TrueCar (NASDAQ: TRUE) and NIC (NASDAQ:EGOV) are both small-cap computer and technology companies, but which is the superior investment? We will contrast the two companies based on the strength of their profitability, dividends, valuation, analyst recommendations, earnings, risk and institutional ownership.

Volatility and Risk

TrueCar has a beta of 3, meaning that its share price is 200% more volatile than the S&P 500. Comparatively, NIC has a beta of 0.4, meaning that its share price is 60% less volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of current ratings and target prices for TrueCar and NIC, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
TrueCar 1 2 7 0 2.60
NIC 1 5 1 0 2.00

TrueCar presently has a consensus target price of $18.50, suggesting a potential upside of 10.65%. NIC has a consensus target price of $19.67, suggesting a potential upside of 16.03%. Given NIC’s higher probable upside, analysts plainly believe NIC is more favorable than TrueCar.

Profitability

This table compares TrueCar and NIC’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
TrueCar -9.86% -11.00% -8.49%
NIC 17.31% 38.37% 23.00%

Earnings & Valuation

This table compares TrueCar and NIC’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
TrueCar $306.80 million 5.37 -$16.51 million ($0.35) -47.77
NIC $327.22 million 3.43 $83.34 million $0.84 20.18

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

Insider and Institutional Ownership

91.7% of TrueCar shares are owned by institutional investors. Comparatively, 92.9% of NIC shares are owned by institutional investors. 15.5% of TrueCar shares are owned by company insiders. Comparatively, 4.1% of NIC shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock is poised for long-term growth.

Dividends

NIC pays an annual dividend of $0.32 per share and has a dividend yield of 1.9%. TrueCar does not pay a dividend. NIC pays out 38.1% of its earnings in the form of a dividend.

Summary

NIC beats TrueCar on 9 of the 15 factors compared between the two stocks.

About TrueCar

TrueCar, Inc. is an Internet-based information, technology, and communication services company. The Company has a data-driven online platform, which features market data and analytics. The Company-branded platform is available on its TrueCar Website and mobile applications. It customizes and operates its platform on a co-branded basis for its affinity group marketing partners, including financial institutions, membership-based organizations, and employee buying programs for a range of enterprises. The Company enables users to obtain market-based pricing data on new and used cars, and to connect with its network of TrueCar Certified Dealers. Its network of over 13,000 TrueCar Certified Dealers consists primarily of new car franchises, as well as independent dealers selling used vehicles. Its subsidiary, ALG, Inc., provides forecasts and consulting services regarding determination of the residual value of an automobile at given future points in time.

About NIC

NIC Inc. is a provider of digital government services that help governments use technology to provide services to businesses and citizens. The Company operates through Outsourced Portals segment. The Company offers its services through two channels: primary outsourced portal businesses, and software and services businesses. In the primary outsourced portal businesses, the Company enters into contracts with state and local governments to design, build, and operate Internet-based, enterprise-wide portals on their behalf. Its software and services businesses include its subsidiaries that provide software development and payment processing services, other than outsourced portal services, to state and local governments, as well as federal agencies. The Company’s outsourced portal businesses include interactive government services (IGS), driver history records (DHR), Portal software development and services, and Portal management.

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