VeriSign, Inc. (NASDAQ:VRSN) and Groupon, Inc. (NASDAQ:GRPN) are both Technology companies that recently hit new low. 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.
VeriSign, Inc. (NASDAQ:VRSN) operates in the Internet Information Providers segment of the Technology sector. The company has grown sales at a 8.10% annual rate over the past five years, putting it in the medium growth category. VRSN has a net profit margin of 39.80% and is more profitable than the average company in the Internet Information Providers industry. In terms of efficiency, VRSN has an asset turnover ratio of 0.47. This figure represents the amount of revenue a company generates per dollar of assets. Company’s return on equity, which is really just the product of the company’s profit margin, asset turnover, and financial leverage ratios, is -38.20%, 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 1.1. Company trades at a P/E ratio of 30.42, and is less expensive than the average stock in the Internet Information Providers industry. The average investment recommendation for VRSN, taken from a group of Wall Street Analysts, is 3.30, or a hold.
Over the past three months, VeriSign, Inc. insiders have been net buyers, dumping a net of -5,499 shares. This implies that insiders have been feeling relatively bearish about the outlook for VRSN. 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. VRSN has a beta of 1.02 and therefore an above average level of market volatility.
Groupon, Inc. (NASDAQ:GRPN) operates in the Internet Information Providers segment of the Technology sector. GRPN has increased sales at a 14.30% CAGR over the past five years, and is considered a high growth stock. The company has a net profit margin of -3.00% and is less profitable than the average Internet Information Providers player. GRPN’s asset turnover ratio is 2.1 and the company has financial leverage of 3.42. GRPN’s return on equity of -40.80% is worse than the Internet Information Providers industry average.
The average analyst recommendation for GRPN is 2.90, or a hold.
Groupon, Inc. insiders have sold a net of -764,360 shares during the past three months, which implies that the company’s top executives have been feeling bearish about the stock’s outlook. Finally, GRPN’s beta of 1.52 indicates that the stock has an above average level of market risk.
VeriSign, Inc. (NASDAQ:VRSN) scores higher than Groupon, Inc. (NASDAQ:GRPN) on 6 of the 13 measures compared between the two companies. VRSN has the better fundamentals, scoring higher on profitability, leverage and return metrics. VRSN has better insider activity and sentiment signals.