Monotype Imaging (TYPE) and Formula Systems (1985) (FORTY) Financial Review

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Monotype Imaging (NASDAQ:TYPE) and Formula Systems (1985) (NASDAQ:FORTY) are both small-cap computer and technology companies, but which is the superior business? We will compare the two businesses based on the strength of their dividends, valuation, risk, analyst recommendations, institutional ownership, earnings and profitability.

Insider and Institutional Ownership

89.6% of Monotype Imaging shares are held by institutional investors. Comparatively, 0.1% of Formula Systems (1985) shares are held by institutional investors. 3.4% of Monotype Imaging shares are held by company insiders. Comparatively, 23.3% of Formula Systems (1985) shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Dividends

Monotype Imaging pays an annual dividend of $0.46 per share and has a dividend yield of 2.8%. Formula Systems (1985) pays an annual dividend of $0.47 per share and has a dividend yield of 1.2%. Monotype Imaging pays out 86.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Monotype Imaging has raised its dividend for 6 consecutive years. Monotype Imaging is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Volatility & Risk

Monotype Imaging has a beta of 1.01, indicating that its stock price is 1% more volatile than the S&P 500. Comparatively, Formula Systems (1985) has a beta of 0.8, indicating that its stock price is 20% less volatile than the S&P 500.

Profitability

This table compares Monotype Imaging and Formula Systems (1985)’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Monotype Imaging 6.02% 10.00% 6.46%
Formula Systems (1985) 1.83% 3.42% 1.68%

Analyst Ratings

This is a breakdown of recent ratings and price targets for Monotype Imaging and Formula Systems (1985), as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Monotype Imaging 0 1 1 0 2.50
Formula Systems (1985) 0 0 0 0 N/A

Monotype Imaging presently has a consensus price target of $31.00, indicating a potential upside of 88.91%. Given Monotype Imaging’s higher probable upside, research analysts clearly believe Monotype Imaging is more favorable than Formula Systems (1985).

Earnings and Valuation

This table compares Monotype Imaging and Formula Systems (1985)’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Monotype Imaging $235.79 million 2.89 $11.56 million $0.53 30.96
Formula Systems (1985) $1.36 billion 0.42 $10.35 million N/A N/A

Monotype Imaging has higher earnings, but lower revenue than Formula Systems (1985).

Summary

Monotype Imaging beats Formula Systems (1985) on 12 of the 15 factors compared between the two stocks.

About Monotype Imaging

Monotype Imaging Holdings Inc. develops, markets, and licenses technologies and fonts in the United States, the United Kingdom, Germany, Japan, and rest of Asia. The company offers font products, including its own fonts from the Monotype Libraries, as well as fonts from third parties through its e-commerce Websites, including myfonts.com, fonts.com, fontshop.com, and linotype.com. It also provides font scaling engine and font compression technologies that are compatible with virtually font formats and industry standards, including the PostScript and PCL printing languages; font solutions for consumer device manufacturers, including Edge and SmartHint technologies for precise pixel adjustments to enable fonts to display with optimal quality in suboptimal display environments; printer driver kits; and fonts for printer manufacturers. In addition, the company offers screen imaging technologies; a mobile engagement platform that enables brands and advertisers to create and distribute branded content; brand engagement and social endorsement technologies through mobile and digital channels; and various tools to enhance user experiences. Further, it provides expert consultation and custom type design services; and technology support and professional services. The company provides approximately 14,000 typeface designs, and supports approximately 250 Latin and non-Latin languages. Its solutions are used in various devices, including laser printers, digital copiers, mobile phones, automotive displays, navigation devices, e-book readers, tablets, digital cameras, digital televisions, set-top boxes, consumer appliances, and Internet of things devices, as well as in various software applications and operating systems. The company serves content creators, marketers, consumer device manufacturers, and independent software vendors and developers. Monotype Imaging Holdings Inc. is headquartered in Woburn, Massachusetts.

About Formula Systems (1985)

Formula Systems (1985) Ltd., through its subsidiaries, provides software, proprietary and non-proprietary software, and software product marketing and support services. The company offers computer and telecommunication infrastructure solutions; computer solutions to computer and communications infrastructures; cloud computing solutions; database and big data services; customer relations management, computer systems management infrastructures, Web world content management, database and data warehouse mining, application integration, database and systems, data management, and software development tools; and professional training courses and advanced professional studies. It also markets and sells computers and peripheral equipment to business customers. In addition, the company offers life, pension, and annuities platforms/solutions, including Sapiens ALIS, LifeSuite, Life Portraits, LifeApply, Sapiens INSIGHT, and Sapiens Closed Books; property and casualty/general insurance platforms/solutions, such as Sapiens IDIT, Adaptik Policy, Adaptik Billing, Stream Claim, Sapiens Stingray, PowerSuite, and CompSuite; and reinsurance software solutions comprising Sapiens Reinsurance, Freedom Reinsurance System, and Universal Reinsurance System. Further, it provides financial and compliance solutions that include eFreedom Annual Statement, PRO Financial General Ledger and Accounts Payable, Preferred Tax Enterprise Financial applications, Insurance Financial reporting, and Power2Play; Sapiens DECISION, a decision management platform; and technology-based solutions and digital insurance suites. Additionally, the company offers application development and business process integration platforms; vertical software solutions; vendor of software services and IT outsourcing software services; and professionals in various areas, as well as develops on-premise payroll software solutions. The company was founded in 1985 and is headquartered in Or Yehuda, Israel.

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