Comparing Smith Micro Software (NASDAQ:SMSI) & Palo Alto Networks (NASDAQ:PANW)

Palo Alto Networks (NASDAQ:PANW) and Smith Micro Software (NASDAQ:SMSI) are both technology companies, but which is the better stock? We will compare the two companies based on the strength of their institutional ownership, risk, analyst recommendations, valuation, profitability, earnings and dividends.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Palo Alto Networks	2.67%	8.50%	4.35%
Smith Micro Software	-92.60%	-44.59%	-31.78%

Risk & Volatility

Palo Alto Networks has a beta of 0.93, meaning that its stock price is 7% less volatile than the S&P 500. Comparatively, Smith Micro Software has a beta of 0.75, meaning that its stock price is 25% less volatile than the S&P 500.

Analyst Ratings

This is a breakdown of current ratings for Palo Alto Networks and Smith Micro Software, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Palo Alto Networks	0	11	39	0	2.78
Smith Micro Software	1	0	2	0	2.33

Palo Alto Networks currently has a consensus price target of $398.55, indicating a potential upside of 16.64%. Smith Micro Software has a consensus price target of $12.50, indicating a potential upside of 407.10%. Given Smith Micro Software’s higher probable upside, analysts clearly believe Smith Micro Software is more favorable than Palo Alto Networks.

Earnings and Valuation

This table compares Palo Alto Networks and Smith Micro Software”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Palo Alto Networks	$11.48 billion	24.35	$307.00 million	$0.51	669.97
Smith Micro Software	$17.36 million	0.79	-$29.33 million	($3.52)	-0.70

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

Institutional & Insider Ownership

79.8% of Palo Alto Networks shares are owned by institutional investors. Comparatively, 20.8% of Smith Micro Software shares are owned by institutional investors. 1.4% of Palo Alto Networks shares are owned by insiders. Comparatively, 34.7% of Smith Micro Software shares are owned by 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.

Summary

Palo Alto Networks beats Smith Micro Software on 12 of the 14 factors compared between the two stocks.

About Palo Alto Networks

Palo Alto Networks, Inc. provides cybersecurity solutions worldwide. The company offers firewall appliances and software; and Panorama, a security management solution for the global control of network security platform as a virtual or a physical appliance. It also provides subscription services covering the areas of threat prevention, malware and persistent threat, URL filtering, laptop and mobile device protection, DNS security, Internet of Things security, SaaS security API, and SaaS security inline, as well as threat intelligence, and data loss prevention. In addition, the company offers cloud security, secure access, security operations, and threat intelligence and security consulting; professional services, including architecture design and planning, implementation, configuration, and firewall migration; education services, such as certifications, as well as online and in-classroom training; and support services. It sells its products and services through its channel partners, as well as directly to medium to large enterprises, service providers, and government entities operating in various industries, including education, energy, financial services, government entities, healthcare, Internet and media, manufacturing, public sector, and telecommunications. Palo Alto Networks, Inc. was incorporated in 2005 and is headquartered in Santa Clara, 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.