Twitter, Inc. (NYSE:TWTR) and Akamai Technologies, Inc. (NYSE:AKAM) are both Technology companies that recently hit new highs. This price action has ruffled more than a few feathers in the investment community, but is one a better investment than the other? To answer this, we will compare the two companies across growth, profitability, risk, return, dividends, and valuation measures.
Twitter, Inc. (NYSE:TWTR) operates in the Internet Information Providers segment of the Technology sector. The company has grown sales at a 88.50% annual rate over the past five years, putting it in the high growth category. TWTR has a net profit margin of -15.10% and is less profitable than the average company in the Internet Information Providers industry. In terms of efficiency, TWTR has an asset turnover ratio of 0.35. This figure represents the amount of revenue a company generates per dollar of assets. TWTR’s financial leverage ratio is 0.46, which indicates that the company’s asset base is primarily funded by equity capital. Company’s return on equity, which is really just the product of the company’s profit margin, asset turnover, and financial leverage ratios, is -7.80%, which is worse than the Internet Information Providers industry average ROE.
Stock’s free cash flow yield, which represents the amount of cash available to investors before dividends, expressed as a percentage of the stock price, is 1.33. The average investment recommendation for TWTR, taken from a group of Wall Street Analysts, is 3.20, or a hold.
Over the past three months, Twitter, Inc. insiders have been net buyers, dumping a net of -6,784,931 shares. This implies that insiders have been feeling relatively bearish about the outlook for TWTR. Insider activity and sentiment signals are important to monitor because they can shed light on how “risky” a stock is perceived to be at it’s current valuation. Knowing this, it makes sense to look at beta, a measure of market risk. TWTR has a beta of 1.11 and therefore an above average level of market volatility.
Akamai Technologies, Inc. (NASDAQ:AKAM) operates in the Internet Information Providers segment of the Technology sector. AKAM has increased sales at a 15.10% CAGR over the past five years, and is considered a high growth stock. The company has a net profit margin of 11.80% and is more profitable than the average Internet Information Providers player. AKAM’s asset turnover ratio is 0.55 and the company has financial leverage of 0.38. AKAM’s return on equity of 8.90% is worse than the Internet Information Providers industry average.
Stock has a payout ratio of 0.00%. According to this ratio, AKAM should be able to continue making payouts at these levels. The company trades at a free cash flow yield of 1.22 and has a P/E of 33.78. Compared to the average company in the 53.96 space, AKAM is relatively cheap. The average analyst recommendation for AKAM is 2.50, or a hold.
Akamai Technologies, Inc. insiders have bought a net of 28,313 shares during the past three months, which implies that the company’s top executives have been feeling bullish about the stock’s outlook. Finally, AKAM’s beta of 0.66 indicates that the stock has an above average level of market risk.
Twitter, Inc. (NASDAQ:AKAM) scores higher than Akamai Technologies, Inc. (NYSE:TWTR) on 7 of the 13 measures compared between the two companies. AKAM has the better fundamentals, scoring higher on profitability, efficiency, leverage and return metrics. AKAM has better insider activity and sentiment signals.