West (NASDAQ: WSTC) and Sonus Networks (NASDAQ:SONS) are both small-cap technology companies, but which is the superior investment? We will compare the two businesses based on the strength of their dividends, risk, analyst recommendations, earnings, valuation, profitability and institutional ownership.

Earnings and Valuation

This table compares West and Sonus Networks’ top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio NetIncome Earnings Per Share Price/Earnings Ratio
West N/A N/A N/A $2.52 9.33
Sonus Networks $252.59 million 3.12 -$13.93 million ($0.45) -17.07

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

Analyst Recommendations

This is a breakdown of current ratings and recommmendations for West and Sonus Networks, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
West 0 5 0 0 2.00
Sonus Networks 1 1 5 0 2.57

West currently has a consensus target price of $24.50, suggesting a potential upside of 4.26%. Sonus Networks has a consensus target price of $8.71, suggesting a potential upside of 13.39%. Given Sonus Networks’ stronger consensus rating and higher possible upside, analysts clearly believe Sonus Networks is more favorable than West.

Dividends

West pays an annual dividend of $0.45 per share and has a dividend yield of 1.9%. Sonus Networks does not pay a dividend. West pays out 17.9% of its earnings in the form of a dividend.

Profitability

This table compares West and Sonus Networks’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
West 7.79% N/A 5.18%
Sonus Networks -8.82% -1.87% -1.32%

Insider and Institutional Ownership

67.4% of West shares are held by institutional investors. Comparatively, 69.4% of Sonus Networks shares are held by institutional investors. 4.6% of West shares are held by company insiders. Comparatively, 7.7% of Sonus Networks shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company will outperform the market over the long term.

Summary

Sonus Networks beats West on 7 of the 12 factors compared between the two stocks.

About West

West Corporation is a provider of communication and network infrastructure services. The Company helps its clients communicate, collaborate and connect with their audiences through a portfolio of solutions that include unified communications services, safety services, and interactive services, such as automated notifications, specialized agent services and telecom services. The Company’s segments include Unified Communications Services, which includes collaboration services, Unified Communications as a Service (UCaaS) and telecom services; Safety Services, which includes carrier services, government solutions and advanced services; Interactive Services, including outbound (proactive notifications-voice, text/short messaging service (SMS) and chat), inbound speech solutions (interactive voice response or IVR), Web, mobile and professional services, and Specialized Agent Services, which includes healthcare advocacy services, cost management services and revenue generation.

About Sonus Networks

Sonus Networks, Inc., formerly Solstice Sapphire Investments, Inc., is a provider of networked solutions for communications service providers and enterprises to help them secure and unify their real-time communications infrastructures. The Company helps communications service providers and enterprises hold the session initiation protocol (SIP) and fourth generation (4G)/long term evolution (LTE)-based solutions, including voice over Internet protocol (VoIP), voice over wireless fidelity (VoWiFi), video and unified communications (UC) by securing and enabling Internet Protocol (IP) networks. Its products include session border controllers (SBCs), diameter signaling controllers (DSCs) and VoWiFi solutions. Sonus Products include Sonus GSX9000 Open Services Switch, Sonus T7000 Intelligent Switching System, Sonus Diameter Signaling Controllers, Sonus Signal Transfer Points, Sonus PSX Policy & Routing Server, Sonus WebRTC Services Solution, and Sonus Network Management Solutions.

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