DST Systems (DST) and Zendesk (ZEN) Critical Contrast

DST Systems (NYSE: DST) and Zendesk (NYSE:ZEN) are both mid-cap computer and technology companies, but which is the superior investment? We will compare the two businesses based on the strength of their institutional ownership, dividends, earnings, risk, valuation, profitability and analyst recommendations.

Earnings and Valuation

This table compares DST Systems and Zendesk’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
DST Systems $2.22 billion 2.25 $451.50 million $3.36 25.00
Zendesk $430.49 million 13.68 -$110.63 million ($1.03) -54.69

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

Risk and Volatility

DST Systems has a beta of 1.51, indicating that its stock price is 51% more volatile than the S&P 500. Comparatively, Zendesk has a beta of 1.51, indicating that its stock price is 51% more volatile than the S&P 500.

Institutional and Insider Ownership

85.7% of DST Systems shares are held by institutional investors. Comparatively, 94.9% of Zendesk shares are held by institutional investors. 1.8% of DST Systems shares are held by insiders. Comparatively, 4.7% of Zendesk shares are held 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.

Profitability

This table compares DST Systems and Zendesk’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
DST Systems 20.35% 16.90% 6.96%
Zendesk -24.18% -30.37% -14.97%

Analyst Recommendations

This is a breakdown of current ratings for DST Systems and Zendesk, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
DST Systems 0 4 0 0 2.00
Zendesk 0 3 12 0 2.80

DST Systems currently has a consensus target price of $68.33, indicating a potential downside of 18.64%. Zendesk has a consensus target price of $48.60, indicating a potential downside of 13.72%. Given Zendesk’s stronger consensus rating and higher possible upside, analysts clearly believe Zendesk is more favorable than DST Systems.

Dividends

DST Systems pays an annual dividend of $0.72 per share and has a dividend yield of 0.9%. Zendesk does not pay a dividend. DST Systems pays out 21.4% of its earnings in the form of a dividend. DST Systems has raised its dividend for 2 consecutive years.

Summary

DST Systems beats Zendesk on 9 of the 16 factors compared between the two stocks.

About DST Systems

DST Systems, Inc. provides technology-based information processing and servicing solutions in the United States, the United Kingdom, Canada, Australia, and internationally. It operates through Domestic Financial Services, International Financial Services, and Healthcare Services segments. The Domestic Financial Services segment provides investor, investment, advisor/intermediary, and asset distribution services to companies in the financial services industry to support direct and intermediary sales of mutual funds, alternative investments, securities brokerage accounts, and retirement plans. Its services include transaction processing; account opening and maintenance; reconciliation of trades, positions, and cash; corporate actions; regulatory reporting and compliance functions; and tax reporting. The International Financial Services segment offers investor and policyholder administration and technology services on a remote processing and business process outsourcing basis to mutual fund managers, insurers, and platform providers, as well as provides solutions related to participant accounting and recordkeeping for clients in the wealth management and retirement savings industries/markets. Its Healthcare Services segment offers software applications to provide healthcare organizations with pharmacy, healthcare administration, and health outcomes optimization solutions for information processing, quality of care, cost management, and payment integrity needs; and healthcare solutions, including claims adjudication, benefit management, care management, business intelligence, and other ancillary services. The company was founded in 1968 and is headquartered in Kansas City, Missouri.

About Zendesk

Zendesk, Inc., a software development company, provides SaaS products for organizations. Its flagship product is Zendesk Support, a system for tracking, prioritizing, and solving customer support tickets across various channels. The company also offers Zendesk Chat, a live chat software to connect with customers on Websites, in applications, and on mobile devices; Zendesk Talk, a cloud-based call center software; Zendesk Guide, a knowledge base that for customer self-service and support agent productivity; Zendesk Message, a customer messaging software; and Zendesk Explore that makes customer data accessible across an organization. In addition, it operates a developer platform that allows organizations to extend the functionality of its family of products, integrate into internal and third-party systems, and customize the experience for their employees and customers. It has operations in the United States, Europe, the Middle East, Africa, and internationally. Zendesk, Inc. was founded in 2007 and is headquartered in San Francisco, California.

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