Head to Head Review: Red Hat (RHT) & Smith Micro Software (NASDAQ:SMSI)

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

Earnings & Valuation

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

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Smith Micro Software $28.24 million 1.22 -$14.51 million ($0.73) -3.30
Red Hat $2.41 billion 9.14 $253.70 million $1.84 67.67

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

Analyst Recommendations

This is a summary of current recommendations and price targets for Smith Micro Software and Red Hat, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Smith Micro Software 0 0 0 0 N/A
Red Hat 1 8 22 0 2.68

Red Hat has a consensus price target of $125.31, indicating a potential upside of 0.64%. Given Red Hat’s higher probable upside, analysts plainly believe Red Hat is more favorable than Smith Micro Software.

Risk & Volatility

Smith Micro Software has a beta of 0.19, indicating that its stock price is 81% less volatile than the S&P 500. Comparatively, Red Hat has a beta of 1.19, indicating that its stock price is 19% more volatile than the S&P 500.

Profitability

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

Net Margins Return on Equity Return on Assets
Smith Micro Software -39.83% -265.05% -37.51%
Red Hat 12.14% 26.23% 7.66%

Insider and Institutional Ownership

14.9% of Smith Micro Software shares are owned by institutional investors. Comparatively, 93.6% of Red Hat shares are owned by institutional investors. 22.0% of Smith Micro Software shares are owned by insiders. Comparatively, 0.7% of Red Hat shares are owned by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock is poised for long-term growth.

Summary

Red Hat beats Smith Micro Software on 12 of the 13 factors compared between the two stocks.

About Smith Micro Software

Smith Micro Software, Inc. is a provider of software solutions. The Company operates through two segments: Wireless and Graphics. The Company offers multi-platform, modular solutions organized into three product families, including NetWise, CommSuite and QuickLink. For mobile network operators, NetWise helps reduce cellular congestion and optimize data traffic across third-generation (3G), fourth-generation (4G) and wireless fidelity (Wi-Fi) networks. Graphics segment includes its consumer-based products, such as Poser, Anime Studio, Manga Studio, MotionArtist and StuffIt. The Graphics segment develops a range of software, including graphic design and animation, compression and personal computer (PC)/Mac utilities, for consumers, professional artists and educators. The Company also offers Family Safety platform for family locator and parental controls.

About Red Hat

Red Hat, Inc. (Red Hat) provides open source software solutions, using a community-powered approach to develop and offer operating system, virtualization, management, middleware, cloud, mobile and storage technologies. Red Hat operates through three geographical segments: the Americas, including the United States, Canada and Latin America; EMEA, including Europe, Middle East and Africa, and Asia Pacific. Its products and services include infrastructure-related offerings, application development-related and other technology offerings, and consulting, support and training services. Its infrastructure-related offerings include Red Hat Enterprise Linux, Red Hat Satellite and Red Hat Enterprise Virtualization. Its application development-related and other technology offerings include Red Hat JBoss Middleware, Red Hat cloud offerings, Red Hat Mobile and Red Hat Storage. Its consulting services include upgrade planning, platform migrations, solution integration and application development.

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