Demandware (NYSE: DWRE) and Rackspace Hosting (NYSE:RAX) are both technology companies, but which is the superior investment? We will compare the two businesses based on the strength of their institutional ownership, earnings, valuation, risk, profitabiliy, analyst recommendations and dividends.

Earnings and Valuation

This table compares Demandware and Rackspace Hosting’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Demandware N/A N/A N/A ($1.20) -62.47
Rackspace Hosting N/A N/A N/A $1.15 27.82

Demandware is trading at a lower price-to-earnings ratio than Rackspace Hosting, indicating that it is currently the more affordable of the two stocks.

Analyst Ratings

This is a summary of current recommendations and price targets for Demandware and Rackspace Hosting, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Demandware 0 0 0 0 N/A
Rackspace Hosting 1 9 2 0 2.08

Rackspace Hosting has a consensus target price of $31.17, suggesting a potential downside of 2.57%. Given Rackspace Hosting’s higher probable upside, analysts clearly believe Rackspace Hosting is more favorable than Demandware.

Insider & Institutional Ownership

78.0% of Rackspace Hosting shares are owned by institutional investors. 15.5% of Rackspace Hosting shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Profitability

This table compares Demandware and Rackspace Hosting’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Demandware -17.65% -16.30% -12.67%
Rackspace Hosting 6.84% 14.85% 7.14%

Risk & Volatility

Demandware has a beta of 1.46, suggesting that its share price is 46% more volatile than the S&P 500. Comparatively, Rackspace Hosting has a beta of 1.55, suggesting that its share price is 55% more volatile than the S&P 500.

Summary

Rackspace Hosting beats Demandware on 9 of the 9 factors compared between the two stocks.

About Demandware

Demandware, Inc. is a provider of enterprise-class cloud commerce solutions for retailers and branded manufacturers, including solutions for digital commerce and point of sale, as well as order management and intelligence capabilities. The Company’s Demandware Commerce offering is a combination of its cloud platform, community and related services that enables customers to establish and execute complex digital commerce solutions. Demandware Commerce facilitates omni-channel processes, multi-brand and multi-site rollouts, predictive merchandising and in-store operations. Its technology platform is the Demandware Commerce Cloud. The Demandware Commerce Cloud consists of over two primary solutions, such as Demandware Digital and Demandware Store. It also offers Demandware LINK, which includes technology, solution and an end-to end partners. LINK Technology Partners provide customers with access to technologies that complement the Demandware Commerce Cloud through pre-built integrations.

About Rackspace Hosting

Rackspace Hosting, Inc. (Rackspace) operates in the managed cloud segment of the business information technology (IT) market. The Company offers a portfolio of integrated IT solutions for common business needs. The Company offers services for certain applications, including e-commerce and Web content management sites, business-productivity applications, such as e-mail and collaboration, and data stores. The Company offers private, public and hybrid clouds in its approximately 10 data centers located on over four continents, in Microsoft Azure and Amazon Web Services data centers, as well as in customer-owned data centers. Its services include dedicated customer care and technical support, such as operating system patching, application monitoring, network and firewall configurations, and identity management. The Company has operations located in multiple cities across the United States, as well as in London, Amsterdam, Zurich, Hong Kong, Sydney and Mexico City.

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