Critical Analysis: DLH (NASDAQ:DLHC) and Resources Connection (NASDAQ:RGP)

DLH (NASDAQ:DLHC) and Resources Connection (NASDAQ:RGP) are both small-cap business services companies, but which is the better investment? We will compare the two companies based on the strength of their risk, dividends, analyst recommendations, institutional ownership, valuation, earnings and profitability.

Analyst Recommendations

This is a summary of current recommendations for DLH and Resources Connection, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
DLH	0	0	0	0	0.00
Resources Connection	1	0	0	0	1.00

Resources Connection has a consensus price target of $5.00, indicating a potential downside of 2.15%. Given Resources Connection’s stronger consensus rating and higher possible upside, analysts clearly believe Resources Connection is more favorable than DLH.

Risk and Volatility

DLH has a beta of 1.38, indicating that its share price is 38% more volatile than the S&P 500. Comparatively, Resources Connection has a beta of 0.63, indicating that its share price is 37% less volatile than the S&P 500.

Earnings and Valuation

This table compares DLH and Resources Connection”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
DLH	$395.94 million	0.20	$7.40 million	$0.32	17.44
Resources Connection	$551.33 million	0.31	-$191.78 million	($5.82)	-0.88

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

Profitability

This table compares DLH and Resources Connection’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
DLH	1.27%	4.08%	1.47%
Resources Connection	-34.78%	0.31%	0.23%

Institutional and Insider Ownership

67.3% of DLH shares are held by institutional investors. Comparatively, 93.2% of Resources Connection shares are held by institutional investors. 15.3% of DLH shares are held by insiders. Comparatively, 3.4% of Resources Connection shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company will outperform the market over the long term.

Summary

DLH beats Resources Connection on 8 of the 13 factors compared between the two stocks.

About DLH

DLH Holdings Corp. provides technology-enabled business process outsourcing, program management solutions, and public health research and analytics services in the United States. It offers digital transformation and cyber security solutions, including artificial intelligence and machine learning, cloud enablement, cybersecurity ecosystem, big data analytics, and modeling and simulation to the National Institutes of Health (NIH), the Defense Health Agency, Tele-medicine and Advanced Technology Research Center, and US Navy Naval Information Warfare Center (NIWC). The company also provides science research and development services and solutions, such as data analytics, testing and evaluation, clinical trials research services, and epidemiology studies to support multiple operating divisions, including NIH and the Center for Disease Control and Prevention, as well as the Military Health System. In addition, it offers system engineering and integration solutions in the areas of pharmaceutical delivery logistics, fire protection engineering, biomedical equipment, and technology engineering on behalf of the Department of Veterans Affairs, NIWC, Health and Human Services, and other federal customers. The company also provides business process management services under the trademarks, e-PRAT and SPOT-m, as well as the registered trademark, Infinibyte for cloud-based solutions. The company was formerly known as TeamStaff, Inc. and changed its name to DLH Holdings Corp. in June 2012. DLH Holdings Corp. was incorporated in 1969 and is headquartered in Atlanta, Georgia.

About Resources Connection

Resources Connection, Inc. provides consulting services to business customers under the Resources Global Professionals name in North America, Europe, and the Asia Pacific. The company offers services in the areas of transactions, including integration and divestitures, bankruptcy/restructuring, going public readiness and support, financial process optimization, and system implementation; and regulations, such as accounting regulations, internal audit and compliance, data privacy and security, healthcare compliance, and regulatory compliance. It provides transformations services comprising finance transformation, digital transformation, supply chain management, cloud migration, and data design and analytics. The company was formerly known as RC Transaction Corp. and changed its name to Resources Connection, Inc. in August 2000. Resources Connection, Inc. was founded in 1996 and is headquartered in Irvine, California.