Xerox (XRX) versus Palo Alto Networks (PANW) Financial Analysis

Xerox (NYSE: XRX) and Palo Alto Networks (NYSE:PANW) are both business services companies, but which is the better investment? We will contrast the two companies based on the strength of their profitability, institutional ownership, earnings, risk, analyst recommendations, valuation and dividends.

Valuation and Earnings

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This table compares Xerox and Palo Alto Networks’ gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Xerox $10.27 billion 0.70 $195.00 million $3.48 8.09
Palo Alto Networks $1.76 billion 9.77 -$216.60 million ($1.71) -109.58

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

Profitability

This table compares Xerox and Palo Alto Networks’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Xerox 1.67% 17.13% 5.50%
Palo Alto Networks -9.96% -14.74% -3.07%

Insider & Institutional Ownership

85.7% of Xerox shares are held by institutional investors. Comparatively, 82.1% of Palo Alto Networks shares are held by institutional investors. 0.3% of Xerox shares are held by insiders. Comparatively, 4.8% of Palo Alto Networks shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Volatility & Risk

Xerox has a beta of 1.19, indicating that its stock price is 19% more volatile than the S&P 500. Comparatively, Palo Alto Networks has a beta of 0.93, indicating that its stock price is 7% less volatile than the S&P 500.

Dividends

Xerox pays an annual dividend of $1.00 per share and has a dividend yield of 3.5%. Palo Alto Networks does not pay a dividend. Xerox pays out 28.7% of its earnings in the form of a dividend. Xerox has increased its dividend for 5 consecutive years.

Analyst Recommendations

This is a summary of current recommendations and price targets for Xerox and Palo Alto Networks, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Xerox 0 2 7 0 2.78
Palo Alto Networks 1 4 37 0 2.86

Xerox presently has a consensus price target of $35.81, suggesting a potential upside of 27.13%. Palo Alto Networks has a consensus price target of $183.00, suggesting a potential downside of 2.34%. Given Xerox’s higher possible upside, research analysts plainly believe Xerox is more favorable than Palo Alto Networks.

Summary

Xerox beats Palo Alto Networks on 12 of the 17 factors compared between the two stocks.

Xerox Company Profile

Xerox Corporation designs, develops, and sells document management systems and solutions worldwide. It offers managed document services, including managed print services and multi-channel communication services, as well as a range of digital solutions, such as workflow automation services, content management, and digitization services. The company also provides desktop monochrome and color printers, and multifunction printers; copiers, digital printing presses and light production devices, and solutions; graphic communications and commercial printers; inkjet presses; and FreeFlow portfolio of software solutions for the automation and integration of print jobs processing. In addition, it sells paper products, wide-format systems, and global imaging systems network integration solutions. The company sells its products and services directly to its customers through sales force, as well as through independent agents, dealers, value-added resellers, systems integrators, and the Web. Xerox Corporation was founded in 1906 and is headquartered in Norwalk, Connecticut.

Palo Alto Networks Company Profile

Palo Alto Networks, Inc. provides security platform solutions worldwide. Its platform includes Next-Generation Firewall that delivers application, user, and content visibility and control, as well as protection against network-based cyber threats; Advanced Endpoint Protection, which prevents cyber-attacks that exploit software vulnerabilities on various fixed, mobile, and virtual endpoints and servers; and Threat Intelligence Cloud, which offers central intelligence capabilities, security for software as a service applications, and automated delivery of preventative measures against cyber-attacks. The company provides firewall appliances and software; Panorama, a security management solution for the control of appliances deployed on an end-customer's network as a virtual or a physical appliance; and Virtual System Upgrades, which are available as extensions to the virtual system capacity that ships with physical appliances. It also offers subscription services covering the areas of threat prevention, uniform resource locator filtering, malware and persistent threat, laptop and mobile device protection, and firewall, as well as cyber-attack, threat intelligence, and content control. In addition, the company provides support services; and professional services, including application traffic management, solution design and planning, configuration, and firewall migration, as well as online and classroom-style education training services. Palo Alto Networks, Inc. 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. The company was founded in 2005 and is headquartered in Santa Clara, California.

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