Rosetta Stone (NYSE: RST) and New Relic (NYSE:NEWR) are both computer and technology companies, but which is the superior investment? We will contrast the two companies based on the strength of their profitability, analyst recommendations, earnings, institutional ownership, dividends, valuation and risk.

Institutional and Insider Ownership

72.2% of Rosetta Stone shares are owned by institutional investors. Comparatively, 77.2% of New Relic shares are owned by institutional investors. 14.5% of Rosetta Stone shares are owned by insiders. Comparatively, 23.1% of New Relic shares are owned by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Volatility and Risk

Rosetta Stone has a beta of 0.83, suggesting that its share price is 17% less volatile than the S&P 500. Comparatively, New Relic has a beta of 1.03, suggesting that its share price is 3% more volatile than the S&P 500.

Profitability

This table compares Rosetta Stone and New Relic’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Rosetta Stone -4.97% -926.26% -3.43%
New Relic -19.43% -29.19% -16.09%

Analyst Ratings

This is a summary of recent ratings and price targets for Rosetta Stone and New Relic, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Rosetta Stone 0 0 1 0 3.00
New Relic 0 3 9 0 2.75

Rosetta Stone presently has a consensus target price of $15.00, suggesting a potential upside of 15.92%. New Relic has a consensus target price of $54.18, suggesting a potential downside of 4.49%. Given Rosetta Stone’s stronger consensus rating and higher possible upside, equities research analysts plainly believe Rosetta Stone is more favorable than New Relic.

Earnings and Valuation

This table compares Rosetta Stone and New Relic’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Rosetta Stone $194.09 million 1.49 -$27.55 million ($0.42) -30.81
New Relic $263.48 million 11.85 -$61.07 million ($1.12) -50.65

Rosetta Stone has higher earnings, but lower revenue than New Relic. New Relic is trading at a lower price-to-earnings ratio than Rosetta Stone, indicating that it is currently the more affordable of the two stocks.

Summary

New Relic beats Rosetta Stone on 7 of the 13 factors compared between the two stocks.

About Rosetta Stone

Rosetta Stone Inc. (Rosetta Stone) offers personalized language and reading programs. The Company’s solutions are used by schools, businesses, government organizations and individuals around the world. Its segments include Enterprise & Education, which derives revenues from sales to educational institutions, corporations and government agencies worldwide, and Consumer, which derives revenue from sales to individuals and retail partners. Its cloud-based programs allow users to learn online or on-the-go via tablet or smartphone, whether in a classroom, corporate setting, or personal learning environment. Its Fit Brains business offers personalized brain training programs. The Company offers courses in over 30 languages across formats, including Web-based software subscriptions, digital downloads, mobile applications, and perpetual compact disc packages. It also offers a portfolio of technology-based learning products for personal use to the global consumer.

About New Relic

New Relic, Inc. (New Relic) is a provider of enterprise software. The Company’s cloud-based platform and range of products enable organizations to collect, store and analyze software data in real time. The Company’s New Relic Software Analytics Cloud consists of an integrated suite of products, a data database and an open platform. New Relic offers an integrated suite of products, namely, New Relic APM, for application performance management; New Relic Mobile, for mobile application performance management; New Relic Servers, for server monitoring for cloud and data centers; New Relic Browser, for end user experience monitoring and performance monitoring; New Relic Synthetics, for software testing through simulated usage; New Relic Plugins, plugins to extend its functionality into other applications; New Relic Alerts, for policy management and delivering alerts across entire suite of products, and New Relic Insights, for real-time big data analytics for business managers.

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