Critical Review: Convergys (CVG) & Conduent (CNDT)

Convergys (NYSE: CVG) and Conduent (NYSE:CNDT) are both mid-cap business services companies, but which is the better stock? We will contrast the two businesses based on the strength of their profitability, valuation, earnings, dividends, risk, analyst recommendations and institutional ownership.

Dividends

Convergys pays an annual dividend of $0.40 per share and has a dividend yield of 1.6%. Conduent does not pay a dividend. Convergys pays out 30.8% of its earnings in the form of a dividend. Convergys has raised its dividend for 4 consecutive years.

Analyst Recommendations

This is a breakdown of recent recommendations and price targets for Convergys and Conduent, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Convergys 0 4 1 0 2.20
Conduent 0 5 3 0 2.38

Convergys presently has a consensus target price of $26.00, suggesting a potential upside of 7.04%. Conduent has a consensus target price of $18.50, suggesting a potential upside of 22.92%. Given Conduent’s stronger consensus rating and higher possible upside, analysts clearly believe Conduent is more favorable than Convergys.

Valuation & Earnings

This table compares Convergys and Conduent’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Convergys $2.91 billion 0.77 $143.00 million $1.30 18.68
Conduent $6.41 billion 0.49 -$983.00 million ($4.85) -3.10

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

Insider & Institutional Ownership

98.7% of Convergys shares are owned by institutional investors. Comparatively, 88.7% of Conduent shares are owned by institutional investors. 1.7% of Convergys shares are owned by company insiders. Comparatively, 0.0% of Conduent 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.

Profitability

This table compares Convergys and Conduent’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Convergys 4.54% 13.92% 7.85%
Conduent -16.18% 5.45% 2.35%

Summary

Convergys beats Conduent on 10 of the 16 factors compared between the two stocks.

Convergys Company Profile

Convergys Corporation is engaged in customer experience outsourcing. The Company’s geographical segments include North America and Rest of World. The Company offers services across industries, including communications and media, technology, financial services, retail, government and healthcare. The Company helps businesses to create customer experiences across multiple interaction channels, such as voice, chat, e-mail and interactive voice response. The Company provides solutions across the customer lifecycle, including sales, customer service, technical support, customer retention and collections. Its omni-channel contact center technology solutions include multichannel interaction solutions, cross-channel integration framework and robotic process automation. It offers analytics and consulting, and software solutions, including integrated customer experience analytics, post-contact surveys, relational loyalty research, and customer segmentation and profiling.

Conduent Company Profile

Conduent Incorporated is a provider of business process services, including transaction-intensive processing, analytics and automation services. The Company’s segments include Commercial Industries, Healthcare and Public Sector. The Commercial Industries segment provides business process services and customized solutions to clients in a range of industries (other than healthcare). The Healthcare segment provides industry-centric business process services to clients across the healthcare industry, including providers, payers, employers, pharmaceutical and life science companies and government agencies. The Public Sector segment provides government-centric business process services and subject matter experts to the United States federal, state and local and foreign governments. The Government Health Enterprise (HE) Medicaid Platform for all current state clients and Student Loan businesses are included in Other.

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