Head-To-Head Comparison: West (WSTC) vs. Communications Systems (NASDAQ:JCS)

Communications Systems (NASDAQ: JCS) and West (NASDAQ:WSTC) are both small-cap computer and technology companies, but which is the better business? We will contrast the two companies based on the strength of their earnings, dividends, institutional ownership, profitability, valuation, analyst recommendations and risk.

Analyst Recommendations

This is a summary of recent ratings and target prices for Communications Systems and West, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Communications Systems 0 0 1 0 3.00
West 0 5 0 0 2.00

Communications Systems presently has a consensus price target of $6.00, indicating a potential upside of 59.57%. West has a consensus price target of $24.50, indicating a potential upside of 4.26%. Given Communications Systems’ stronger consensus rating and higher probable upside, research analysts plainly believe Communications Systems is more favorable than West.

Valuation and Earnings

This table compares Communications Systems and West’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Communications Systems $99.35 million 0.34 -$8.11 million ($1.34) -2.81
West N/A N/A N/A $2.52 9.33

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

Dividends

Communications Systems pays an annual dividend of $0.16 per share and has a dividend yield of 4.3%. West pays an annual dividend of $0.45 per share and has a dividend yield of 1.9%. Communications Systems pays out -11.9% of its earnings in the form of a dividend. West pays out 17.9% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Communications Systems is clearly the better dividend stock, given its higher yield and lower payout ratio.

Institutional & Insider Ownership

32.1% of Communications Systems shares are held by institutional investors. Comparatively, 67.4% of West shares are held by institutional investors. 19.5% of Communications Systems shares are held by company insiders. Comparatively, 4.6% of West shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Profitability

This table compares Communications Systems and West’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Communications Systems -13.91% -20.94% -17.56%
West 7.79% N/A 5.18%

Summary

Communications Systems beats West on 7 of the 13 factors compared between the two stocks.

About Communications Systems

Communications Systems, Inc. (CSI) operates directly and through its subsidiaries located in the United States, Costa Rica and the United Kingdom. The Company operates through three segments: Suttle, Transition Networks and JDL Technologies (JDL). The Company provides physical connectivity infrastructure products and services for global deployments of broadband networks. The Company is principally engaged through its subsidiary and business unit, Suttle, Inc., in the manufacture and sale of connectivity infrastructure products for broadband and voice communications, and through its another subsidiary and business unit, Transition Networks, Inc., in the manufacture and sale of core media conversion products for broadband networks. Through its JDL Technologies, Inc. subsidiary and business unit, CSI provides information technology (IT) solutions, including network design, computer infrastructure installations, IT service management, network security and network operation services.

About West

West Corporation is a provider of communication and network infrastructure services. The Company helps its clients communicate, collaborate and connect with their audiences through a portfolio of solutions that include unified communications services, safety services, and interactive services, such as automated notifications, specialized agent services and telecom services. The Company’s segments include Unified Communications Services, which includes collaboration services, Unified Communications as a Service (UCaaS) and telecom services; Safety Services, which includes carrier services, government solutions and advanced services; Interactive Services, including outbound (proactive notifications-voice, text/short messaging service (SMS) and chat), inbound speech solutions (interactive voice response or IVR), Web, mobile and professional services, and Specialized Agent Services, which includes healthcare advocacy services, cost management services and revenue generation.

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