Critical Analysis: Microsoft (MSFT) versus Solera (SLH)

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

Profitability

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

Net Margins Return on Equity Return on Assets
Microsoft 24.56% 35.23% 11.27%
Solera 18.15% N/A 6.01%

Dividends

Microsoft pays an annual dividend of $1.68 per share and has a dividend yield of 1.9%. Solera pays an annual dividend of $0.90 per share and has a dividend yield of 1.6%. Microsoft pays out 56.8% of its earnings in the form of a dividend. Solera pays out -45.5% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Microsoft has increased its dividend for 8 consecutive years and Solera has increased its dividend for 14 consecutive years.

Valuation & Earnings

This table compares Microsoft and Solera’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Microsoft $89.95 billion 7.72 $21.20 billion $2.96 30.41
Solera N/A N/A N/A ($1.98) -28.20

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

Volatility and Risk

Microsoft has a beta of 0.99, indicating that its stock price is 1% less volatile than the S&P 500. Comparatively, Solera has a beta of 0.26, indicating that its stock price is 74% less volatile than the S&P 500.

Insider & Institutional Ownership

73.2% of Microsoft shares are owned by institutional investors. 1.5% of Microsoft shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Analyst Recommendations

This is a breakdown of current recommendations for Microsoft and Solera, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Microsoft 2 8 26 0 2.67
Solera 0 0 0 0 N/A

Microsoft presently has a consensus price target of $87.33, indicating a potential downside of 2.96%. Given Microsoft’s higher possible upside, research analysts clearly believe Microsoft is more favorable than Solera.

Summary

Microsoft beats Solera on 12 of the 14 factors compared between the two stocks.

Microsoft Company Profile

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.

Solera Company Profile

Solera Holdings, Inc. is a United States-based company, which is a provider of risk and asset management software and services to the automotive and property marketplace, including the global property and casualty (P&C) insurance industry. The Company is engaged in cognitive technologies for the automotive and home ownership ecosystems. The Company’s solutions and services bring together consumers, insurers, banks, governments, manufacturers, owners, wholesalers, retailers, and service and repair industries, into digitally unified ecosystems that enable the management, protection and security of assets throughout their lifecycles. The Company’s product platforms include Audatex, AutoPoint, CAP/HPI, Digidentity, Explore Data, Hollander, Identifix, Inpart and TitleTec, as well as the company’s application, Digital Garage. The Company processes over 240 million transactions annually for approximately 200,000 partners in approximately 80 countries.

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