Critical Analysis: iHeartMedia (NASDAQ:IHRT) versus PubMatic (NASDAQ:PUBM)

PubMatic (NASDAQ:PUBM) and iHeartMedia (NASDAQ:IHRT) are both small-cap communication services companies, but which is the superior business? We will contrast the two businesses based on the strength of their profitability, dividends, institutional ownership, risk, valuation, earnings and analyst recommendations.

Analyst Ratings

This is a breakdown of recent recommendations and price targets for PubMatic and iHeartMedia, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
PubMatic	1	1	11	0	2.77
iHeartMedia	2	1	0	0	1.33

PubMatic presently has a consensus target price of $19.73, indicating a potential upside of 6.23%. iHeartMedia has a consensus target price of $4.25, indicating a potential upside of 110.40%. Given iHeartMedia’s higher probable upside, analysts plainly believe iHeartMedia is more favorable than PubMatic.

Profitability

This table compares PubMatic and iHeartMedia’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
PubMatic	-4.66%	-5.41%	-1.99%
iHeartMedia	-7.18%	N/A	-1.12%

Valuation & Earnings

This table compares PubMatic and iHeartMedia”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
PubMatic	$282.93 million	2.99	-$14.46 million	($0.30)	-61.90
iHeartMedia	$3.86 billion	0.08	-$472.87 million	($1.82)	-1.11

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

Risk & Volatility

PubMatic has a beta of 1.56, suggesting that its stock price is 56% more volatile than the S&P 500. Comparatively, iHeartMedia has a beta of 2.28, suggesting that its stock price is 128% more volatile than the S&P 500.

Insider & Institutional Ownership

64.3% of PubMatic shares are held by institutional investors. Comparatively, 93.9% of iHeartMedia shares are held by institutional investors. 27.8% of PubMatic shares are held by company insiders. Comparatively, 10.2% of iHeartMedia shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

About PubMatic

PubMatic, Inc., a technology company, engages in the provision of a cloud infrastructure platform that enables real-time programmatic advertising transactions for digital content creators, advertisers, agencies, agency trading desks, and demand side platforms worldwide. Its PubMatic SSP, a sell-side platform, used for the purchase and sale of digital advertising inventory for publishers and buyers. The company also provides solutions, including OpenWrap, a header bidding solution; Openwrap OTT, a prebid-powered unified bidding solution; Openwrap SDK, an enterprise-grade management tools and analytics; Connect, a solution that provides additional data and insights to publishers and buyers; Activate, which allows buyers to execute direct deals on its platform across publisher inventory; Convert, a commerce media solution; and Identity Hub, an ID management tool for publishers that leverages specialized technology?infrastructure?to simplify the complex alternative identifier marketplace. Its platform supports an array of ad formats and digital device types, including mobile app, mobile web, desktop, display, video, over-the-top (OTT), connected television, and media. The company was incorporated in 2006 and is based in Redwood City, California.

About iHeartMedia

iHeartMedia, Inc. operates as an audio media company in the United States and internationally. It operates through three segments: Multiplatform Group, Digital Audio Group, and Audio & Media Services Group. The Multiplatform Group segment offers broadcast radio stations, sponsorship and events, and live and virtual events; and operates Premiere Networks, a national radio network that produces, distributes, or represents syndicated radio programs and services to radio station affiliates. It also delivers real-time traffic flow and incident information, and weather updates, sports, and news. The Digital Audio Group segment provides podcasting, digital sites, newsletters, digital services, and programs; and iHeartRadio, a mobile app and web based service for radio stations, digital only stations, custom artist stations, and podcasts. The Audio and Media Services Group segment engages in the media representation business; and provides scheduling and broadcast software and services. This segment also provides RCS, a cloud and on-premises broadcast software, such as radio and television automation, music scheduling, newsroom automation, advertising sales management, disaster recovery solutions; and real-time audio recognition technology to radio and television stations, cable channels, record labels, advertisers, and agencies, as well as media streaming and research services. The company was formerly known as CC Media Holdings, Inc. and changed its name to iHeartMedia, Inc. in September 2014. The company is headquartered in San Antonio, Texas.