Critical Review: Zoom Communications (NASDAQ:ZM) and Guidewire Software (NYSE:GWRE)

Guidewire Software (NYSE:GWRE) and Zoom Communications (NASDAQ:ZM) are both large-cap technology companies, but which is the superior business? We will compare the two businesses based on the strength of their risk, institutional ownership, dividends, valuation, earnings, profitability and analyst recommendations.

Profitability

This table compares Guidewire Software and Zoom Communications’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Guidewire Software	9.44%	12.66%	6.73%
Zoom Communications	65.19%	10.86%	8.93%

Analyst Ratings

This is a breakdown of current ratings for Guidewire Software and Zoom Communications, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Guidewire Software	0	4	12	0	2.75
Zoom Communications	0	12	16	0	2.57

Guidewire Software presently has a consensus price target of $216.23, suggesting a potential upside of 53.50%. Zoom Communications has a consensus price target of $112.55, suggesting a potential upside of 17.76%. Given Guidewire Software’s stronger consensus rating and higher probable upside, equities research analysts plainly believe Guidewire Software is more favorable than Zoom Communications.

Risk and Volatility

Guidewire Software has a beta of 0.97, meaning that its share price is 3% less volatile than the S&P 500. Comparatively, Zoom Communications has a beta of 1.04, meaning that its share price is 4% more volatile than the S&P 500.

Valuation and Earnings

This table compares Guidewire Software and Zoom Communications”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Guidewire Software	$1.48 billion	7.95	$139.28 million	$1.63	86.42
Zoom Communications	$4.87 billion	5.73	$1.90 billion	$10.80	8.85

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

Insider and Institutional Ownership

66.5% of Zoom Communications shares are held by institutional investors. 0.5% of Guidewire Software shares are held by insiders. Comparatively, 8.8% of Zoom Communications shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Summary

Zoom Communications beats Guidewire Software on 9 of the 14 factors compared between the two stocks.

About Guidewire Software

Guidewire Software, Inc. provides a platform for property and casualty (P&C) insurers worldwide. The company offers Guidewire InsuranceSuite Cloud, such as PolicyCenter Cloud, BillingCenter Cloud, and ClaimCenter Cloud applications. It also provides Guidewire InsuranceNow, a cloud-based platform that offers policy, billing, and claims management functionality to insurers; and Guidewire InsuranceSuite for Self-Managed. In addition, the company offers Guidewire Rating Management to manage the pricing of insurance products; and Guidewire Reinsurance Management to use rules-based logic to execute reinsurance strategy through underwriting and claims processes. Further, it provides Guidewire Underwriting Management, a cloud-based integrated business application; Guidewire AppReader, a submission intake management solution; Guidewire ClaimCenter Package for the London market supports the claims workflow used by London Market insurers and brokers; Guidewire Digital Engagement Applications, which enable insurers to provide digital experiences to customers, agents, vendors, and field personnel through their device of choice; and Guidewire for Salesforce to provide customer information regarding policies and claims. Additionally, the company offers Guidewire Predict, a P&C-specific machine-learning platform; Guidewire HazardHub that allows insurers to understand, assess, price, and manage property risk; Guidewire Canvas, Guidewire Compare, and Guidewire Explore cloud-native applications; and Guidewire Cyence, a cyber-risk economic modeling product. The company was incorporated in 2001 and is headquartered in San Mateo, California.

About Zoom Communications

Zoom Video Communications, Inc. provides unified communications platform in the Americas, the Asia Pacific, Europe, the Middle East, and Africa. The company offers Zoom Meetings that offers HD video, voice, chat, and content sharing through mobile devices, desktops, laptops, telephones, and conference room systems; Zoom Phone, an enterprise cloud phone system; and Zoom Chat enables users to share messages, images, audio files, and content in desktop, laptop, tablet, and mobile devices. It also provides Zoom Rooms, a software-based conference room system; Zoom Conference Room Connector, a gateway for SIP/H.323 endpoints to join Zoom meetings; Zoom Events, which enables users to manage and host internal and external virtual events; OnZoom, a prosumer-focused virtual event platform and marketplace for Zoom users to create, host, and monetize online events; and Zoom Webinars to provide video presentations to large audiences from many devices. In addition, the company offers Zoom Developer Platform that enables developers, platform integrators, service providers, and customers to build apps and integrations using Zoom’s video-based communications solutions, as well as integrate Zoom’s technology into their products and services; Zoom App Marketplace, which helps developers to publish their apps, as well as third-party integrations of Zoom; and Zoom Contact Center, an omnichannel contact center solution. It serves individuals; and education, entertainment/media, enterprise infrastructure, finance, government, healthcare, manufacturing, non-profit/not for profit and social impact, retail/consumer products, and software/Internet industries. The company was formerly known as Zoom Communications, Inc. and changed its name to Zoom Video Communications, Inc. in May 2012. The company was incorporated in 2011 and is headquartered in San Jose, California.