Red Hat, Inc. (NYSE:RHT) and Box, Inc. (NYSE:BOX) 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.
Red Hat, Inc. (NYSE:RHT) operates in the Application Software segment of the Technology sector. The company has grown sales at a 16.30% annual rate over the past five years, putting it in the high growth category. RHT has a net profit margin of 9.60% and is more profitable than the average company in the Application Software industry. In terms of efficiency, RHT has an asset turnover ratio of 0.6. This figure represents the amount of revenue a company generates per dollar of assets. RHT’s financial leverage ratio is 2.31, which indicates that the company’s asset base is primarily funded by debt. Company’s return on equity, which is really just the product of the company’s profit margin, asset turnover, and financial leverage ratios, is 20.30%, which is better than the Application Software 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 0.64. Company trades at a P/E ratio of 65.31 , and is more expensive than the average stock in the Application Software industry. The average investment recommendation for RHT, taken from a group of Wall Street Analysts, is 2.10, or a buy.
Over the past three months, Red Hat, Inc. insiders have been net buyers, dumping a net of -42,896 shares. This implies that insiders have been feeling relatively bearish about the outlook for RHT. 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. RHT has a beta of 1.19 and therefore an above average level of market volatility.
Box, Inc. (NYSE:BOX) operates in the Application Software segment of the Technology sector. BOX has increased sales at a 80.00% CAGR over the past five years, and is considered a high growth stock. The company has a net profit margin of -33.20% and is less profitable than the average Application Software player. BOX’s asset turnover ratio is 1.01 and the company has financial leverage of 16.06. BOX’s return on equity of -314.00% is worse than the Application Software industry average.
The average analyst recommendation for BOX is 1.80, or a buy.
Box, Inc. insiders have bought a net of 76,813 shares during the past three months, which implies that the company’s top executives have been feeling bullish about the stock’s outlook.
Red Hat, Inc. (NYSE:BOX) scores higher than Box, Inc. (NYSE:RHT) on 6 of the 13 measures compared between the two companies. BOX has the better fundamentals, scoring higher on growth and efficiency metrics. BOX has better insider activity and sentiment signals.