Rapid7 (NASDAQ: RPD) and Microsoft (NASDAQ:MSFT) are both computer and technology companies, but which is the better business? We will contrast the two businesses based on the strength of their dividends, risk, profitability, institutional ownership, valuation, earnings and analyst recommendations.

Analyst Recommendations

This is a breakdown of recent ratings for Rapid7 and Microsoft, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Rapid7 0 1 7 0 2.88
Microsoft 2 8 27 0 2.68

Rapid7 currently has a consensus target price of $20.94, indicating a potential upside of 11.55%. Microsoft has a consensus target price of $84.19, indicating a potential downside of 1.22%. Given Rapid7’s stronger consensus rating and higher possible upside, analysts clearly believe Rapid7 is more favorable than Microsoft.

Earnings & Valuation

This table compares Rapid7 and Microsoft’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Rapid7 $157.44 million 5.23 -$49.00 million ($0.99) -18.96
Microsoft $89.95 billion 7.31 $21.20 billion $2.94 28.99

Microsoft has higher revenue and earnings than Rapid7. Rapid7 is trading at a lower price-to-earnings ratio than Microsoft, indicating that it is currently the more affordable of the two stocks.

Insider & Institutional Ownership

70.7% of Rapid7 shares are owned by institutional investors. Comparatively, 73.3% of Microsoft shares are owned by institutional investors. 56.9% of Rapid7 shares are owned by insiders. Comparatively, 1.5% of Microsoft shares are owned by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.

Dividends

Microsoft pays an annual dividend of $1.68 per share and has a dividend yield of 2.0%. Rapid7 does not pay a dividend. Microsoft pays out 57.1% of its earnings in the form of a dividend. Microsoft has increased its dividend for 13 consecutive years.

Profitability

This table compares Rapid7 and Microsoft’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Rapid7 -22.44% -115.79% -17.52%
Microsoft 24.56% 35.23% 11.27%

Volatility and Risk

Rapid7 has a beta of 0.68, meaning that its share price is 32% less volatile than the S&P 500. Comparatively, Microsoft has a beta of 0.99, meaning that its share price is 1% less volatile than the S&P 500.

Summary

Microsoft beats Rapid7 on 12 of the 16 factors compared between the two stocks.

About Rapid7

Rapid7, Inc. is a provider analytics for security and information technology (IT) operations that enable organizations to implement an analytics-driven approach to cyber security and IT operations. The Company’s analytics enable organizations to contextualize and prioritize the threats facing their physical, virtual and cloud assets, including those posed by the behaviors of their users. Leveraging its IT data and analytics platform, its solutions enable organizations to manage their cyber security exposure and manage IT operations. Its solutions empower organizations to prevent attacks by providing visibility into vulnerabilities, and allow them to detect compromises, respond to breaches and correct the underlying causes of attacks. By providing a unified IT and security platform, with automated workflow, it enables IT and security to work together to develop, operate and secure their environment.

About Microsoft

Microsoft Corporation is a technology company. The Company develops, licenses, and supports a range of software products, services and devices. The Company’s segments include Productivity and Business Processes, Intelligent Cloud and More Personal Computing. The Company’s products include operating systems; cross-device productivity applications; server applications; business solution applications; desktop and server management tools; software development tools; video games, and training and certification of computer system integrators and developers. It also designs, manufactures, and sells devices, including personal computers (PCs), tablets, gaming and entertainment consoles, phones, other intelligent devices, and related accessories, that integrate with its cloud-based offerings. It offers an array of services, including cloud-based solutions that provide customers with software, services, platforms, and content, and it provides solution support and consulting services.

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