CDK Global (CDK) versus American Software (AMSWA) Financial Comparison

CDK Global (NASDAQ: CDK) and American Software (NASDAQ:AMSWA) are both technology companies, but which is the superior investment? We will contrast the two businesses based on the strength of their institutional ownership, dividends, analyst recommendations, profitability, risk, earnings and valuation.

Dividends

CDK Global pays an annual dividend of $0.60 per share and has a dividend yield of 0.8%. American Software pays an annual dividend of $0.44 per share and has a dividend yield of 3.4%. CDK Global pays out 29.1% of its earnings in the form of a dividend. American Software pays out 77.2% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Earnings & Valuation

This table compares CDK Global and American Software’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
CDK Global $2.22 billion 4.69 $295.60 million $2.06 36.78
American Software $106.29 million 3.68 $14.62 million $0.57 22.75

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

Volatility & Risk

CDK Global has a beta of 0.78, indicating that its stock price is 22% less volatile than the S&P 500. Comparatively, American Software has a beta of 0.82, indicating that its stock price is 18% less volatile than the S&P 500.

Profitability

This table compares CDK Global and American Software’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
CDK Global 13.42% 515.77% 13.57%
American Software 16.73% 17.27% 12.22%

Analyst Recommendations

This is a summary of recent ratings for CDK Global and American Software, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
CDK Global 0 1 3 0 2.75
American Software 0 0 1 0 3.00

CDK Global presently has a consensus target price of $73.00, suggesting a potential downside of 3.66%. American Software has a consensus target price of $14.00, suggesting a potential upside of 7.94%. Given American Software’s stronger consensus rating and higher possible upside, analysts clearly believe American Software is more favorable than CDK Global.

Institutional & Insider Ownership

87.5% of CDK Global shares are held by institutional investors. Comparatively, 74.7% of American Software shares are held by institutional investors. 0.4% of CDK Global shares are held by insiders. Comparatively, 13.9% of American Software shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company is poised for long-term growth.

Summary

CDK Global beats American Software on 10 of the 16 factors compared between the two stocks.

About CDK Global

CDK Global, Inc. provides integrated information technology and digital marketing solutions. The Company’s segments include Retail Solutions North America, Advertising North America and CDK International. Through its Retail Solutions North America segment, the Company provides technology-based solutions, including automotive Website platforms, that help automotive retailers, original equipment manufacturers (OEMs) and other industry participants manage the acquisition, sale, financing, insuring, parts supply, repair and maintenance of vehicles. Through its Advertising North America segment, the Company provides advertising solutions, including management of digital advertising spend, for OEMs and automotive retailers. As of June 30, 2016, through its CDK International segment, it provided technology-based solutions similar to the retail solutions provided in its Retail Solutions North America segment in approximately 100 countries outside of the United States and Canada.

About American Software

American Software, Inc. (American Software) develops, markets and supports a portfolio of software and services that delivers enterprise management, supply chain and retail planning solutions to the marketplace. The Company operates through three business segments: Supply Chain Management (SCM), Enterprise Resource Planning (ERP) and Information Technology (IT) Consulting. The SCM segment consists of Logility, Inc. and its subsidiary, Demand Management, Inc. (DMI), both of which provide supply chain and retail planning solutions to trading partners. The ERP segment consist of American Software ERP, which provides business software for manufacturers and distributors, and New Generation Computing, Inc. (NGC), which provides industry-specific business software to both retailers and manufacturers in the apparel, footwear, sewn products and furniture industries. The IT Consulting segment consists of The Proven Method, Inc., an IT staffing and consulting services firm.

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