Comparing LegalZoom.com (NASDAQ:LZ) and ScanSource (NASDAQ:SCSC)

LegalZoom.com (NASDAQ:LZ) and ScanSource (NASDAQ:SCSC) are both small-cap industrials companies, but which is the superior investment? We will contrast the two companies based on the strength of their profitability, analyst recommendations, dividends, risk, valuation, earnings and institutional ownership.

Volatility and Risk

LegalZoom.com has a beta of 1.25, suggesting that its share price is 25% more volatile than the S&P 500. Comparatively, ScanSource has a beta of 1.38, suggesting that its share price is 38% more volatile than the S&P 500.

Profitability

This table compares LegalZoom.com and ScanSource’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
LegalZoom.com	4.39%	28.00%	6.96%
ScanSource	2.27%	8.96%	4.68%

Analyst Recommendations

This is a summary of current recommendations and price targets for LegalZoom.com and ScanSource, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
LegalZoom.com	2	5	2	0	2.00
ScanSource	0	1	1	0	2.50

LegalZoom.com currently has a consensus price target of $8.64, indicating a potential upside of 0.97%. ScanSource has a consensus price target of $42.00, indicating a potential upside of 3.75%. Given ScanSource’s stronger consensus rating and higher probable upside, analysts clearly believe ScanSource is more favorable than LegalZoom.com.

Insider and Institutional Ownership

82.0% of LegalZoom.com shares are owned by institutional investors. Comparatively, 97.9% of ScanSource shares are owned by institutional investors. 5.9% of LegalZoom.com shares are owned by company insiders. Comparatively, 4.2% of ScanSource shares are owned by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company is poised for long-term growth.

Valuation & Earnings

This table compares LegalZoom.com and ScanSource”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
LegalZoom.com	$681.88 million	2.27	$29.96 million	$0.17	50.35
ScanSource	$2.97 billion	0.31	$77.06 million	$2.77	14.61

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

About LegalZoom.com

LegalZoom.com, Inc., together with its subsidiaries, operates an online platform that supports the legal, compliance, and business management needs of small businesses and consumers in the United States. The company’s platform offers business formation products, such as limited liability company, incorporation of C and S corporations, nonprofit formations, doing-business-as, corporate changes and filings, business licenses, legal forms, and beneficial ownership information reports; intellectual property products consisting of trademark and patent applications, and copyright registrations; and tax services, including business and personal tax preparations. It also provides consumer, estate planning, and other services comprising last will and testament, living will, living trust, power of attorney, and name change. In addition, the company offers subscriptions services, including registered agent, compliance, attorney advice, tax advice and preparation, eSignature, virtual mail and check deposit services, trademark monitoring, and estate planning bundle. The company was incorporated in 1999 and is headquartered in Mountain View, California.

About ScanSource

ScanSource, Inc. engages in the distribution of technology products and solutions in the United States, Canada, and Brazil. It operates through two segments, Specialty Technology Solutions and Modern Communications & Cloud. The Specialty Technology Solutions segment provides a portfolio of solutions primarily for enterprise mobile computing, data capture, barcode printing, point of sale (POS), payments, networking, electronic physical security, cyber security, and other technologies. This segment offers data capture and POS solutions to automate the collection, processing, and communication of information for commercial and industrial applications, including retail sales, distribution, shipping, inventory control, materials handling, warehouse management, and health care applications. It also provides electronic physical security products, such as identification, access control, video surveillance, and intrusion-related devices; networking products comprising wireless and networking infrastructure products; other software-as-a-service (SaaS) products; and engages in hardware rental activities. The Modern Communications & Cloud segment offers a portfolio of solutions primarily for communications technologies and services comprising voice, video conferencing, wireless, data networking, cybersecurity, cable, unified communications and collaboration, cloud, and technology services, as well as IP networks and other solutions for various vertical markets, such as education, healthcare, and government. The company serves manufacturing, warehouse and distribution, retail and e-commerce, hospitality, transportation and logistics, government, education and healthcare, and other industries. ScanSource, Inc. was incorporated in 1992 and is headquartered in Greenville, South Carolina.