Critical Review: Hawaiian Telcom Holdco (HCOM) and Vonage Holdings Corp. (VG)

Hawaiian Telcom Holdco (NASDAQ: HCOM) and Vonage Holdings Corp. (NYSE:VG) are both small-cap utilities companies, but which is the superior stock? We will compare the two businesses based on the strength of their profitabiliy, institutional ownership, risk, valuation, analyst recommendations, dividends and earnings.

Institutional & Insider Ownership

69.1% of Hawaiian Telcom Holdco shares are owned by institutional investors. Comparatively, 77.4% of Vonage Holdings Corp. shares are owned by institutional investors. 26.0% of Hawaiian Telcom Holdco shares are owned by insiders. Comparatively, 14.1% of Vonage Holdings Corp. shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.

Profitability

This table compares Hawaiian Telcom Holdco and Vonage Holdings Corp.’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Hawaiian Telcom Holdco	-0.25%	-0.32%	-0.12%
Vonage Holdings Corp.	1.63%	13.56%	6.23%

Valuation and Earnings

This table compares Hawaiian Telcom Holdco and Vonage Holdings Corp.’s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	EBITDA	Earnings Per Share	Price/Earnings Ratio
Hawaiian Telcom Holdco	$388.68 million	0.87	$109.16 million	($0.08)	-366.13
Vonage Holdings Corp.	$972.14 million	1.52	$100.53 million	$0.06	110.85

Hawaiian Telcom Holdco has higher revenue, but lower earnings than Vonage Holdings Corp.. Hawaiian Telcom Holdco is trading at a lower price-to-earnings ratio than Vonage Holdings Corp., indicating that it is currently the more affordable of the two stocks.

Volatility and Risk

Hawaiian Telcom Holdco has a beta of 1.13, indicating that its share price is 13% more volatile than the S&P 500. Comparatively, Vonage Holdings Corp. has a beta of -0.01, indicating that its share price is 101% less volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of recent recommendations for Hawaiian Telcom Holdco and Vonage Holdings Corp., as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Hawaiian Telcom Holdco	0	1	0	0	2.00
Vonage Holdings Corp.	0	0	6	0	3.00

Vonage Holdings Corp. has a consensus price target of $8.25, suggesting a potential upside of 24.06%. Given Vonage Holdings Corp.’s stronger consensus rating and higher possible upside, analysts clearly believe Vonage Holdings Corp. is more favorable than Hawaiian Telcom Holdco.

Summary

Vonage Holdings Corp. beats Hawaiian Telcom Holdco on 10 of the 13 factors compared between the two stocks.

Hawaiian Telcom Holdco Company Profile

Hawaiian Telcom Holdco, Inc. is a provider of communications services and products in Hawaii. The Company operates through two business segments: Telecommunications and Data Center Colocation. The Telecommunications segment provides local telephone service, including voice and data transport, custom calling features, network access, directory assistance and private lines. In addition, the segment provides Internet, long distance services, television service, Internet protocol (IP)-based network services, customer premises equipment, data solutions, managed services, billing and collection, wireless services and pay telephone services. The Data Center Colocation segment consists of data center services, including colocation and virtual private cloud. As of December 31, 2016, its telecommunications operations served approximately 296,000 voice access lines, 19,000 business Voice over Internet Protocol (VoIP) lines, 111,000 high-speed Internet lines, and 42,000 video subscribers.

Vonage Holdings Corp. Company Profile

Vonage Holdings Corp. is a provider of cloud communications services for businesses and consumers, and consumer and communication solutions across multiple devices. The Company operates through two segments: Business and Consumer. For business services customers, the Company provides cloud-based unified communications as a service (UCaaS) solutions, consisting of integrated voice, text, video, data, collaboration, and mobile applications over its scalable session initiation protocol (SIP) based voice over Internet protocol (VoIP) network. It serves a range of the business market, including the small and medium business (SMB), mid-market and enterprise segments. Through its cloud-based middleware solution, gUnify, the Company provides customers the ability to integrate its cloud communications platform with various cloud-based productivity and customer relationship management (CRM) solutions, including Google’s G Suite, Zendesk, Salesforce’s Sales Cloud, Oracle and Clio.