Red Hat (RHT) & Microsoft (MSFT) Head to Head Contrast

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

Profitability

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

Net Margins Return on Equity Return on Assets
Red Hat 12.14% 26.23% 7.66%
Microsoft 24.56% 35.23% 11.27%

Analyst Ratings

This is a summary of current ratings and recommmendations for Red Hat and Microsoft, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Red Hat 1 8 23 0 2.69
Microsoft 2 8 26 0 2.67

Red Hat presently has a consensus price target of $126.20, suggesting a potential downside of 1.52%. Microsoft has a consensus price target of $88.61, suggesting a potential downside of 3.58%. Given Red Hat’s stronger consensus rating and higher probable upside, equities analysts clearly believe Red Hat is more favorable than Microsoft.

Institutional and Insider Ownership

94.6% of Red Hat shares are owned by institutional investors. Comparatively, 73.2% of Microsoft shares are owned by institutional investors. 0.7% of Red Hat shares are owned by company insiders. Comparatively, 1.5% of Microsoft shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company will outperform the market over the long term.

Dividends

Microsoft pays an annual dividend of $1.68 per share and has a dividend yield of 1.8%. Red Hat does not pay a dividend. Microsoft pays out 56.8% of its earnings in the form of a dividend. Red Hat has increased its dividend for 14 consecutive years.

Earnings and Valuation

This table compares Red Hat and Microsoft’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Red Hat $2.41 billion 9.40 $253.70 million $1.84 69.65
Microsoft $89.95 billion 7.88 $21.20 billion $2.96 31.05

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

Volatility & Risk

Red Hat has a beta of 1.19, suggesting that its share price is 19% more volatile than the S&P 500. Comparatively, Microsoft has a beta of 0.99, suggesting that its share price is 1% less volatile than the S&P 500.

Summary

Microsoft beats Red Hat on 9 of the 17 factors compared between the two stocks.

About Red Hat

Red Hat, Inc. (Red Hat) provides open source software solutions, using a community-powered approach to develop and offer operating system, virtualization, management, middleware, cloud, mobile and storage technologies. Red Hat operates through three geographical segments: the Americas, including the United States, Canada and Latin America; EMEA, including Europe, Middle East and Africa, and Asia Pacific. Its products and services include infrastructure-related offerings, application development-related and other technology offerings, and consulting, support and training services. Its infrastructure-related offerings include Red Hat Enterprise Linux, Red Hat Satellite and Red Hat Enterprise Virtualization. Its application development-related and other technology offerings include Red Hat JBoss Middleware, Red Hat cloud offerings, Red Hat Mobile and Red Hat Storage. Its consulting services include upgrade planning, platform migrations, solution integration and application development.

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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