NetSpend Holdings (NTSP) & Consumer Portfolio Services (CPSS) Critical Analysis

NetSpend Holdings (NASDAQ: NTSP) and Consumer Portfolio Services (NASDAQ:CPSS) are both consumer credit cards services companies, but which is the superior business? We will contrast the two businesses based on the strength of their earnings, analyst recommendations, dividends, valuation, risk, profitability and institutional ownership.

Analyst Ratings

This is a breakdown of current ratings and price targets for NetSpend Holdings and Consumer Portfolio Services, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
NetSpend Holdings 0 0 0 0 N/A
Consumer Portfolio Services 0 0 1 0 3.00

Consumer Portfolio Services has a consensus price target of $6.00, suggesting a potential upside of 45.28%.

Valuation and Earnings

This table compares NetSpend Holdings and Consumer Portfolio Services’ gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio NetIncome Earnings Per Share Price/Earnings Ratio
NetSpend Holdings N/A N/A N/A $0.44 N/A
Consumer Portfolio Services $422.28 million 0.21 $29.30 million $0.76 5.43

Consumer Portfolio Services has higher revenue and earnings than NetSpend Holdings. NetSpend Holdings is trading at a lower price-to-earnings ratio than Consumer Portfolio Services, indicating that it is currently the more affordable of the two stocks.

Insider and Institutional Ownership

48.9% of Consumer Portfolio Services shares are owned by institutional investors. 37.5% of Consumer Portfolio Services shares are owned by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company is poised for long-term growth.

Profitability

This table compares NetSpend Holdings and Consumer Portfolio Services’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
NetSpend Holdings N/A N/A N/A
Consumer Portfolio Services 4.87% 11.09% 0.87%

Summary

Consumer Portfolio Services beats NetSpend Holdings on 8 of the 8 factors compared between the two stocks.

NetSpend Holdings Company Profile

NetSpend Holdings, Inc. (NetSpend) is a provider of general-purpose reloadable prepaid debit cards (GPR) cards, and related alternative financial services to underbanked consumers in the United States. NetSpend’s GPR cards are tied to the Federal Deposit Insurance Corporation (FDIC)-insured depository accounts and can be used to make purchase transactions at any merchant that participates in the MasterCard, Visa or PULSE networks and to withdraw funds at participating automated teller machines (ATMs). The Company also offers to its cardholders direct deposit, interest-bearing savings accounts, bill pay and card-to-card transfer functionality, personal financial management tools and online and mobile phone card account access. As of December 31, 2010, the Company marketed its GPR cards through approximately 750 retail distributors at approximately 39,000 locations. As of August 21, 2010, the Company ceased marketing gift cards.

Consumer Portfolio Services Company Profile

Consumer Portfolio Services, Inc. is a specialty finance company. The Company’s business is to purchase and service retail automobile contracts originated primarily by franchised automobile dealers and by select independent dealers in the United States in the sale of new and used automobiles, light trucks and passenger vans. Through its automobile contract purchases, the Company provides indirect financing to the customers of dealers having limited credit histories, low incomes or past credit problems, who it refers to as sub-prime customers. It serves as an alternative source of financing for dealers, facilitating sales to customers. The Company offers approximately eight financing programs to its dealership customers and prices each program according to the relative credit risk. Its financing programs are Bravo, First Time Buyer, Mercury/Delta, Standard, Alpha, Alpha Plus, Super Alpha and Preferred.

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