Critical Review: ReachLocal (RLOC) & Autoweb (AUTO)

Autoweb (NASDAQ: AUTO) and ReachLocal (NASDAQ:RLOC) are both cyclical consumer goods & services companies, but which is the superior investment? We will contrast the two companies based on the strength of their profitability, institutional ownership, risk, dividends, analyst recommendations, earnings and valuation.

Analyst Recommendations

This is a breakdown of current ratings and target prices for Autoweb and ReachLocal, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Autoweb 0 0 2 0 3.00
ReachLocal 0 0 0 0 N/A

Autoweb currently has a consensus target price of $12.00, indicating a potential upside of 27.93%. Given Autoweb’s higher possible upside, equities analysts plainly believe Autoweb is more favorable than ReachLocal.

Profitability

This table compares Autoweb and ReachLocal’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Autoweb 1.51% 7.47% 5.68%
ReachLocal -5.20% N/A -15.27%

Valuation and Earnings

This table compares Autoweb and ReachLocal’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Autoweb $156.68 million 0.78 $3.87 million $0.17 55.18
ReachLocal N/A N/A N/A ($1.65) -2.79

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

Insider and Institutional Ownership

46.6% of Autoweb shares are held by institutional investors. 20.7% of Autoweb shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Summary

Autoweb beats ReachLocal on 10 of the 10 factors compared between the two stocks.

Autoweb Company Profile

AutoWeb, Inc., formerly Autobytel Inc., is an automotive marketing services company that assists automotive retail dealers and automotive manufacturers market and sell new and used vehicles to consumers through the programs for online lead referrals, dealer marketing products and services, and online advertising programs and mobile products. The Company operates through providing automotive marketing services segment. Its consumer-facing automotive Websites, including Website Autobytel.com, provide consumers with information and tools to aid them with the automotive purchase decisions and ability to submit inquiries requesting dealers to contact the consumers regarding purchasing or leasing vehicles. Its AutoWeb pay-per-click advertising marketplace program uses technology to refer consumer traffic to dealers and manufacturer Websites.

ReachLocal Company Profile

ReachLocal, Inc. (ReachLocal) offers a range of online marketing and reporting solutions. The Company’s digital marketing solution consists of products and solutions in three categories: digital advertising (including ReachSearch, ReachDisplay, ReachDisplay InApp and ReachRetargeting); Web presence (including ReachSite+ReachEdge, ReachSEO, ReachCast, ReachListings and TotalLiveChat), and software (ReachEdge and Kickserv). It focuses on small to medium-sized businesses (SMBs). The Company delivers its suite of products and solutions to local businesses through a combination of its technology platform, its direct inside and outside sales force, and select third-party agencies and resellers. It also focuses on certain core verticals, which include home services, professional services, specialty services and healthcare. It also provides solutions to multi-location advertisers, such as franchises and other businesses that have multiple locations across a number of cities and states.

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