Zendesk (NYSE:ZEN) vs. RingCentral (NYSE:RNG) Critical Review

RingCentral (NYSE:RNG) and Zendesk (NYSE:ZEN) are both computer and technology companies, but which is the superior investment? We will contrast the two companies based on the strength of their earnings, dividends, valuation, profitability, risk, analyst recommendations and institutional ownership.

Institutional and Insider Ownership

84.0% of RingCentral shares are held by institutional investors. Comparatively, 95.8% of Zendesk shares are held by institutional investors. 11.0% of RingCentral shares are held by insiders. Comparatively, 4.6% of Zendesk shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock will outperform the market over the long term.

Analyst Recommendations

This is a breakdown of recent ratings and price targets for RingCentral and Zendesk, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
RingCentral 0 2 14 1 2.94
Zendesk 0 3 17 0 2.85

RingCentral currently has a consensus price target of $159.81, suggesting a potential downside of 3.42%. Zendesk has a consensus price target of $95.19, suggesting a potential upside of 27.52%. Given Zendesk’s higher probable upside, analysts clearly believe Zendesk is more favorable than RingCentral.

Profitability

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

Net Margins Return on Equity Return on Assets
RingCentral -4.06% -1.61% -0.56%
Zendesk -21.97% -26.50% -8.18%

Volatility & Risk

RingCentral has a beta of 0.9, meaning that its share price is 10% less volatile than the S&P 500. Comparatively, Zendesk has a beta of 1.23, meaning that its share price is 23% more volatile than the S&P 500.

Earnings & Valuation

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

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
RingCentral $673.62 million 20.62 -$26.20 million ($0.04) -4,137.00
Zendesk $598.75 million 13.99 -$131.08 million ($0.95) -78.58

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

Summary

RingCentral beats Zendesk on 10 of the 15 factors compared between the two stocks.

RingCentral Company Profile

RingCentral, Inc. provides software-as-a-service solutions that enable businesses to communicate, collaborate, and connect primarily in North America. The company's products include RingCentral Office, provides communication and collaboration across various modes, including high-definition voice, video, SMS, messaging and collaboration, conferencing, online meetings, and fax through smartphones, tablets, PCs, and desk phones; RingCentral Professional, a cloud based virtual telephone service for professionals, as well as provides inbound call answering and management services, and includes inbound local, long-distance, and toll-free minutes; and RingCentral Fax that provides online fax capabilities that allow businesses to send and receive fax documents without a fax machine. Its products also comprise RingCentral Contact Center, a collaborative contact center solution that delivers omni-channel; and RingCentral Glip, a team messaging and collaboration solution that allows a range of teams to stay connected through various modes of communication through an integration with RingCentral Office. The company serves a range of industries, including financial services, healthcare, legal services, real estate, retail, technology, insurance, construction, hospitality, and state and local government, as well as others. It sells its products through a network of direct sales representatives, as well as sales agents and channel partners. The company was incorporated in 1999 and is headquartered in Belmont, California.

Zendesk Company Profile

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, applications, and mobile devices; Zendesk Talk, a cloud-based call center software; Zendesk Guide, a knowledge base that powers customer self-service and support agent productivity; Zendesk Sell, a sales force automation software to enhance productivity, processes, and pipeline visibility for sales teams; Zendesk Connect that manages customer communication across channels; and Zendesk Explore, which provides analytics for businesses to measure and enhance the customer experience. In addition, it provides Zendesk Sunshine, a customer relationship management platform; Zendesk Embeddables, which allow developers to embed support, chat, and guide experiences on the Web and within mobile applications; and Zendesk application platform interfaces and Apps. The company has operations in North America, Latin America, Europe, the Middle East, Africa, Australia, Asia, and South America. Zendesk, Inc. was founded in 2007 and is headquartered in San Francisco, California.

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