Critical Review: Sprout Social (NASDAQ:SPT) and HubSpot (NYSE:HUBS)

Sprout Social (NASDAQ:SPT) and HubSpot (NYSE:HUBS) are both technology companies, but which is the better stock? We will compare the two companies based on the strength of their valuation, analyst recommendations, institutional ownership, dividends, profitability, earnings and risk.

Institutional and Insider Ownership

90.4% of HubSpot shares are held by institutional investors. 9.6% of Sprout Social shares are held by company insiders. Comparatively, 3.7% of HubSpot shares are held by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company will outperform the market over the long term.

Volatility and Risk

Sprout Social has a beta of 0.97, indicating that its share price is 3% less volatile than the S&P 500. Comparatively, HubSpot has a beta of 1.19, indicating that its share price is 19% more volatile than the S&P 500.

Profitability

This table compares Sprout Social and HubSpot’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Sprout Social	-6.13%	-9.06%	-3.67%
HubSpot	4.26%	8.66%	4.47%

Analyst Recommendations

This is a summary of current ratings and recommmendations for Sprout Social and HubSpot, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Sprout Social	2	3	3	1	2.33
HubSpot	2	15	15	1	2.45

Sprout Social currently has a consensus target price of $10.43, suggesting a potential upside of 4.60%. HubSpot has a consensus target price of $268.90, suggesting a potential upside of 11.80%. Given HubSpot’s stronger consensus rating and higher possible upside, analysts clearly believe HubSpot is more favorable than Sprout Social.

Valuation & Earnings

This table compares Sprout Social and HubSpot”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Sprout Social	$457.55 million	1.31	-$43.33 million	($0.50)	-19.94
HubSpot	$3.13 billion	3.83	$45.91 million	$2.83	84.99

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

Summary

HubSpot beats Sprout Social on 13 of the 14 factors compared between the two stocks.

About Sprout Social

Sprout Social, Inc. designs, develops, and operates a web-based social media management platform in the Americas, Europe, the Middle East, Africa, and the Asia Pacific. The company provides cloud software for social messaging, data and workflows in a unified system of record, intelligence, and action. It offers integrated tools, such as social engagement/response; publishing; reporting and analytics; social listening and business intelligence; reputation management; social commerce; employee advocacy; and automation and workflows. In addition, the company provides smart inbox, social customer relationship management, social monitoring and alerts, customer service tools, and automation; and centralized content planning, creation, and publishing, automated scheduling, content performance reporting, suggested content, message approval workflows, publishing permissions and governance, and content and asset libraries. Further, it offers social media; content performance, customer service and team, custom report builder, and reporting API; and market research, brand health, competitive insights, consumer trends, and product feedback; and social commerce, reputation management, employee advocacy, mobile applications, and chat bot creation and management. Additionally, the company offers professional services consisting of consulting and training services. It serves social and community management; public relations; marketing; influencer marketing; customer service and care; commerce, sales and customer acquisition; recruiting and hiring, product development, and business strategy; and small-and-medium-sized businesses, mid-market companies, enterprises, marketing agencies, government, non-profit, and educational institutions. Sprout Social, Inc. was incorporated in 2010 and is headquartered in Chicago, Illinois.

About HubSpot

HubSpot, Inc., together with its subsidiaries, provides a cloud-based customer relationship management (CRM) platform for businesses in the Americas, Europe, and the Asia Pacific. The company's CRM platform includes Marketing Hub, a toolset for marketing automation and email, social media, SEO, and reporting and analytics; Sales Hub offers email templates and tracking, conversations and live chat, meeting and call scheduling, lead and website visit alerts, lead scoring, sales automation, pipeline management, quoting, forecasting, and reporting; Service Hub, a service software designed to help businesses manage, respond, and connect with customers; and Content Management Systems Hub enables businesses to create new and edit existing web content. It offers Operations Hub, which is designed to unify customer data, automate business processes, data cleanup, and provide customer insights and connections; and Commerce Hub, a B2B commerce suite. In addition, the company provides professional services to educate and train customers on how to utilize its CRM platform; and customer success, as well as phone and/or email and chat-based support services. It serves mid-market business-to-business companies. The company was incorporated in 2005 and is headquartered in Cambridge, Massachusetts.