F5 Networks (NASDAQ: FFIV) and VMware (NYSE:VMW) are both mid-cap computer and technology companies, but which is the better stock? We will contrast the two businesses based on the strength of their profitability, risk, institutional ownership, valuation, dividends, analyst recommendations and earnings.

Analyst Recommendations

This is a breakdown of recent ratings and recommmendations for F5 Networks and VMware, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
F5 Networks 1 15 5 0 2.19
VMware 0 9 20 0 2.69

F5 Networks currently has a consensus price target of $129.24, suggesting a potential downside of 8.87%. VMware has a consensus price target of $124.83, suggesting a potential downside of 5.81%. Given VMware’s stronger consensus rating and higher possible upside, analysts plainly believe VMware is more favorable than F5 Networks.

Institutional & Insider Ownership

94.7% of F5 Networks shares are held by institutional investors. Comparatively, 22.5% of VMware shares are held by institutional investors. 0.3% of F5 Networks shares are held by company insiders. Comparatively, 34.4% of VMware shares are held by company 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.

Risk and Volatility

F5 Networks has a beta of 1.06, suggesting that its stock price is 6% more volatile than the S&P 500. Comparatively, VMware has a beta of 0.67, suggesting that its stock price is 33% less volatile than the S&P 500.

Earnings and Valuation

This table compares F5 Networks and VMware’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
F5 Networks $2.09 billion 4.25 $420.76 million $6.53 21.72
VMware $7.09 billion 7.53 $1.19 billion $3.50 37.87

VMware has higher revenue and earnings than F5 Networks. F5 Networks is trading at a lower price-to-earnings ratio than VMware, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares F5 Networks and VMware’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
F5 Networks 20.13% 34.70% 17.25%
VMware 18.97% 18.57% 8.81%

Summary

VMware beats F5 Networks on 8 of the 14 factors compared between the two stocks.

About F5 Networks

F5 Networks, Inc. is a developer and provider of software defined application services. The Company is engaged in the development, marketing and sale of application delivery networking products that optimize the security, performance and availability of network applications, servers and storage systems. The Company’s geographical segments include the Americas (primarily the United States); Europe, the Middle East, and Africa (EMEA); Japan, and the Asia Pacific region (APAC). The Company’s Traffic Management Operating System (TMOS) based offerings include software products for local and global traffic management, network and application security, access management, Web acceleration and various network and application services. These products are available as modules that can run individually or as part of an integrated solution on the Company’s purpose-built BIG-IP appliances and VIPRION chassis-based hardware, or as software-only Virtual Editions.

About VMware

VMware, Inc. is an information technology (IT) company. The Company is engaged in development and application of virtualization technologies with x86 server-based computing, separating application software from the underlying hardware. The Company offers various products, which allow organizations to manage IT resources across private clouds and multi-cloud, multi-device environments by leveraging synergies across three product categories: Software-Defined Data Center (SDDC), Hybrid Cloud Computing and End-User Computing (EUC). The SDDC is designed to transform and modernize the data center into an on-demand service that addresses application requirements by abstracting, pooling and automating the services that are required from the underlying hardware. The Company provides many storage and availability products to offer data storage and protection options to all applications running on the vSphere platform.

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