Analyzing NetScout Systems (NASDAQ:NTCT) & Open Text (OTEX)

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Open Text (NASDAQ:OTEX) and NetScout Systems (NASDAQ:NTCT) 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 analyst recommendations, dividends, profitability, valuation, earnings, risk and institutional ownership.

Insider and Institutional Ownership

67.7% of Open Text shares are held by institutional investors. 10.6% of Open Text shares are held by insiders. Comparatively, 3.9% of NetScout Systems shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Risk & Volatility

Open Text has a beta of 0.46, suggesting that its share price is 54% less volatile than the S&P 500. Comparatively, NetScout Systems has a beta of 1.1, suggesting that its share price is 10% more volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of current ratings and target prices for Open Text and NetScout Systems, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Open Text 1 0 7 0 2.75
NetScout Systems 0 3 2 0 2.40

Open Text currently has a consensus target price of $44.67, indicating a potential upside of 35.15%. NetScout Systems has a consensus target price of $28.00, indicating a potential upside of 1.52%. Given Open Text’s stronger consensus rating and higher possible upside, research analysts clearly believe Open Text is more favorable than NetScout Systems.

Dividends

Open Text pays an annual dividend of $0.61 per share and has a dividend yield of 1.8%. NetScout Systems does not pay a dividend. Open Text pays out 67.0% of its earnings in the form of a dividend. Open Text has raised its dividend for 3 consecutive years.

Profitability

This table compares Open Text and NetScout Systems’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Open Text 8.51% 7.99% 3.81%
NetScout Systems 1.88% 3.29% 2.10%

Valuation & Earnings

This table compares Open Text and NetScout Systems’ revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Open Text $2.82 billion 3.15 $242.22 million $0.91 36.32
NetScout Systems $986.79 million 2.25 $79.81 million $0.99 27.86

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

Summary

Open Text beats NetScout Systems on 14 of the 17 factors compared between the two stocks.

About Open Text

Open Text Corporation provides a suite of software products and services. The company offers content services; digital process automation, which enables organizations to transform into digital and data-driven businesses through automation; and discovery suite that provides forensics and unstructured data analytics for searching, collecting, and investigating enterprise data to manage legal obligations and risk. It also provides business network solutions comprising business-to-business integration services, such as secure mail, large file transfer, fax, and electronic data interchange within a single platform; analytics solutions; and forensic security and automated cyber risk management software service. In addition, the company provides customer support programs that include access to software upgrades, a knowledge base, discussions, product information, and an online mechanism to post and review trouble tickets. Further, it offers professional services, such as consulting and learning services relating for the implementation, training, and integration of its licensed product offerings into the customers' systems; and cloud services that allow its customers to make use of its OpenText software, services, and content over Internet enabled networks. The company serves organizations, mid-market companies, and government agencies worldwide. It has strategic partnerships with SAP SE, Microsoft Corporation, Oracle Corporation, Salesforce.com Corporation, Accenture plc, Deloitte Consulting LLP, and others. Open Text Corporation was founded in 1991 and is headquartered in Waterloo, Canada.

About NetScout Systems

NetScout Systems, Inc. provides real-time operational intelligence and performance analytics for digital business services against disruptions in availability, performance, and security in the United States, Europe, Asia, and internationally. The company offers nGeniusONE management software that enables customers to predict, preempt, and resolve network and service delivery problems, as well as facilitate the optimization and capacity planning of their network infrastructures; and specialized platforms and analytic modules that enable its customers to analyze and troubleshoot traffic in radio access and Wi-Fi networks. It also provides Intelligent Data Sources under the InfiniStream brand name that provide real-time collection and analysis of data from the network; packet flow systems that deliver targeted network traffic access to an increasing number of monitoring and security systems; and a suite of test access points that enable non-disruptive access to network traffic with multiple link type and speed options. In addition, the company offers portable network analysis and troubleshooting tools, which help customers identify key issues that impact network and application performance. Further, it provides security solutions that enable service providers and enterprises to protect their networks against distributed denial of service attacks; and threat detection solutions that enable enterprises to identify and investigate advanced threat campaigns that present tangible risks to the integrity of their networks. The company serves enterprise customers in industries, such as financial services, technology, manufacturing, healthcare, utilities, education, transportation, and retail; mobile operators, wireline operators, cable operators, and cloud providers; and governmental agencies through a direct sales force, and indirect reseller and distribution channels. NetScout Systems, Inc. was founded in 1984 and is headquartered in Westford, Massachusetts.

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