Reviewing Confluent (NASDAQ:CFLT) and Smith Micro Software (NASDAQ:SMSI)

Confluent (NASDAQ:CFLT) and Smith Micro Software (NASDAQ:SMSI) are both business services companies, but which is the superior stock? We will contrast the two businesses based on the strength of their institutional ownership, earnings, profitability, risk, analyst recommendations, valuation and dividends.

Profitability

This table compares Confluent and Smith Micro Software’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Confluent	-56.99%	-44.16%	-14.52%
Smith Micro Software	-59.70%	-13.46%	-10.91%

Volatility and Risk

Confluent has a beta of 0.93, indicating that its stock price is 7% less volatile than the S&P 500. Comparatively, Smith Micro Software has a beta of 0.68, indicating that its stock price is 32% less volatile than the S&P 500.

Earnings & Valuation

This table compares Confluent and Smith Micro Software’s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Confluent	$776.95 million	12.63	-$442.75 million	($1.47)	-21.35
Smith Micro Software	$40.86 million	0.58	-$24.40 million	($2.96)	-0.83

Smith Micro Software has lower revenue, but higher earnings than Confluent. Confluent is trading at a lower price-to-earnings ratio than Smith Micro Software, indicating that it is currently the more affordable of the two stocks.

Insider and Institutional Ownership

78.1% of Confluent shares are held by institutional investors. Comparatively, 20.8% of Smith Micro Software shares are held by institutional investors. 13.8% of Confluent shares are held by company insiders. Comparatively, 9.4% of Smith Micro Software shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.

Analyst Recommendations

This is a summary of recent ratings and price targets for Confluent and Smith Micro Software, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Confluent	1	6	19	0	2.69
Smith Micro Software	0	0	2	0	3.00

Confluent currently has a consensus price target of $32.77, indicating a potential upside of 4.43%. Smith Micro Software has a consensus price target of $28.00, indicating a potential upside of 1,042.86%. Given Smith Micro Software’s stronger consensus rating and higher possible upside, analysts plainly believe Smith Micro Software is more favorable than Confluent.

Summary

Confluent beats Smith Micro Software on 8 of the 14 factors compared between the two stocks.

About Confluent

Confluent, Inc. operates a data streaming platform in the United States and internationally. The company provides platforms that allow customers to connect their applications, systems, and data layers, such as Confluent Cloud, a managed cloud-native software-as-a-service; and Confluent Platform, an enterprise-grade self-managed software. It offers connectors for existing applications, and IT and cloud infrastructure; Apache Flink services that allows teams to create reusable data streams that can be delivered real-time; ksqlDB, a data-in-motion database that allows users to build data-in-motion applications using a few SQL statements; stream governance, a managed data governance suite that is designed for the intricacies of streaming data, which allows teams to accelerate data streaming initiatives without bypassing controls for risk management and regulatory compliance; and stream designer which builds streaming data pipelines visually. In addition, the company offers professional services comprising packaged and residency offerings; education offerings consisting of instructor-led and self-paced training and certification guidance, technical resources, and access to hands-on training and certification exams; and certification programs. It serves banking and financial services industries, as well as retail and e-commerce, manufacturing, automotive, communication service providers, gaming, public sector, insurance, and technology industries. The company was formerly known as Infinitem, Inc. and changed its name to Confluent, Inc. in September 2014. Confluent, Inc. was incorporated in 2014 and is headquartered in Mountain View, California.

About Smith Micro Software

Smith Micro Software, Inc. engages in the development and sale of software to enhance the mobile experience to wireless and cable service providers in the Americas, Europe, the Middle East, and Africa. The company offers SafePath Family, SafePath IoT, SafePath Home, and SafePath Premium product suite, which provides tools to protect digital lifestyles and manage connected devices inside and outside the home; and CommSuite, a messaging platform that helps mobile service provides deliver a next-generation voicemail experience to mobile subscribers, as well as enables multi-language voice-to-text (VTT) transcription messaging. It also offers ViewSpot, a retail display management platform that provides on-screen and interactive demos to wireless carriers and other smartphone retailers; and technical support and customer services. Smith Micro Software, Inc. was founded in 1982 and is headquartered in Pittsburgh, Pennsylvania.