Critical Contrast: Rackspace Hosting (RAX) and IMS Health Holdings (IMS)

Rackspace Hosting (NYSE: RAX) and IMS Health Holdings (NYSE:IMS) are both computer and technology companies, but which is the superior business? We will compare the two companies based on the strength of their profitabiliy, earnings, analyst recommendations, risk, valuation, dividends and institutional ownership.

Earnings & Valuation

This table compares Rackspace Hosting and IMS Health Holdings’ top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Rackspace Hosting N/A N/A N/A $1.15 27.82
IMS Health Holdings N/A N/A N/A $0.42 74.62

Rackspace Hosting is trading at a lower price-to-earnings ratio than IMS Health Holdings, indicating that it is currently the more affordable of the two stocks.

Insider & Institutional Ownership

78.0% of Rackspace Hosting shares are owned by institutional investors. Comparatively, 90.3% of IMS Health Holdings shares are owned by institutional investors. 15.5% of Rackspace Hosting shares are owned by company insiders. Comparatively, 2.5% of IMS Health Holdings shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock will outperform the market over the long term.

Analyst Recommendations

This is a breakdown of recent recommendations for Rackspace Hosting and IMS Health Holdings, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Rackspace Hosting 1 10 2 0 2.08
IMS Health Holdings 0 0 0 0 N/A

Rackspace Hosting currently has a consensus target price of $30.29, indicating a potential downside of 5.33%. Given Rackspace Hosting’s higher probable upside, equities research analysts clearly believe Rackspace Hosting is more favorable than IMS Health Holdings.

Risk & Volatility

Rackspace Hosting has a beta of 1.55, meaning that its share price is 55% more volatile than the S&P 500. Comparatively, IMS Health Holdings has a beta of 0.83, meaning that its share price is 17% less volatile than the S&P 500.

Profitability

This table compares Rackspace Hosting and IMS Health Holdings’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Rackspace Hosting 7.39% 16.80% 8.52%
IMS Health Holdings 4.45% 30.61% 6.51%

Summary

Rackspace Hosting beats IMS Health Holdings on 7 of the 9 factors compared between the two stocks.

Rackspace Hosting Company Profile

Rackspace Hosting, Inc. (Rackspace) operates in the managed cloud segment of the business information technology (IT) market. The Company offers a portfolio of integrated IT solutions for common business needs. The Company offers services for certain applications, including e-commerce and Web content management sites, business-productivity applications, such as e-mail and collaboration, and data stores. The Company offers private, public and hybrid clouds in its approximately 10 data centers located on over four continents, in Microsoft Azure and Amazon Web Services data centers, as well as in customer-owned data centers. Its services include dedicated customer care and technical support, such as operating system patching, application monitoring, network and firewall configurations, and identity management. The Company has operations located in multiple cities across the United States, as well as in London, Amsterdam, Zurich, Hong Kong, Sydney and Mexico City.

IMS Health Holdings Company Profile

IMS Health Holdings, Inc. (IMS) is an information and technology services company that provides solutions to its clients in the healthcare industry. The Company has its presence in over 100 countries. The Company’s data set contains over 10 petabytes of data and over 500 million patient records. It serves healthcare organizations and life science companies, including pharmaceutical, biotechnology, consumer health and medical device manufacturers, as well as distributors, providers, payers, government agencies, policymakers, researchers and the financial community. The Company’s principal information offerings include national information offerings, sub-national information offerings and OneKey. Its technology services offerings include technology solutions, real-world evidence solutions, and workflow analytics and consulting services. It offers technology services that include data warehousing, information technology (IT) outsourcing, software applications and other services.

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