Rackspace Hosting (NYSE: RAX) and Salesforce.com (NYSE:CRM) are both technology companies, but which is the superior investment? We will compare the two companies based on the strength of their valuation, dividends, institutional ownership, profitability, earnings, analyst recommendations and risk.

Analyst Recommendations

This is a summary of recent recommendations for Rackspace Hosting and Salesforce.com, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Rackspace Hosting 1 8 0 0 1.89
Salesforce.com 1 4 37 0 2.86

Rackspace Hosting presently has a consensus price target of $32.00, indicating a potential upside of 0.03%. Salesforce.com has a consensus price target of $97.13, indicating a potential upside of 7.02%. Given Salesforce.com’s stronger consensus rating and higher probable upside, analysts plainly believe Salesforce.com is more favorable than Rackspace Hosting.

Volatility and Risk

Rackspace Hosting has a beta of 1.55, indicating that its share price is 55% more volatile than the S&P 500. Comparatively, Salesforce.com has a beta of 1.29, indicating that its share price is 29% more volatile than the S&P 500.

Profitability

This table compares Rackspace Hosting and Salesforce.com’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Rackspace Hosting 6.84% 14.85% 7.14%
Salesforce.com 1.49% 1.80% 0.80%

Valuation & Earnings

This table compares Rackspace Hosting and Salesforce.com’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Rackspace Hosting N/A N/A N/A $1.15 27.82
Salesforce.com $8.86 billion 7.30 $448.89 million $0.20 453.80

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

Insider and Institutional Ownership

78.0% of Rackspace Hosting shares are held by institutional investors. Comparatively, 86.3% of Salesforce.com shares are held by institutional investors. 15.5% of Rackspace Hosting shares are held by insiders. Comparatively, 6.7% of Salesforce.com shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock is poised for long-term growth.

Summary

Rackspace Hosting beats Salesforce.com on 6 of the 11 factors compared between the two stocks.

Rackspace Hosting Company Profile

Rackspace Hosting, Inc. (Rackspace) operates in the managed cloud segment of the business information technology (IT) market. The Company offers a portfolio of integrated IT solutions for common business needs. The Company offers services for certain applications, including e-commerce and Web content management sites, business-productivity applications, such as e-mail and collaboration, and data stores. The Company offers private, public and hybrid clouds in its approximately 10 data centers located on over four continents, in Microsoft Azure and Amazon Web Services data centers, as well as in customer-owned data centers. Its services include dedicated customer care and technical support, such as operating system patching, application monitoring, network and firewall configurations, and identity management. The Company has operations located in multiple cities across the United States, as well as in London, Amsterdam, Zurich, Hong Kong, Sydney and Mexico City.

Salesforce.com Company Profile

Salesforce.com, inc. is a provider of enterprise software, delivered through the cloud, with a focus on customer relationship management (CRM). The Company focuses on cloud, mobile, social, Internet of Things (IoT) and artificial intelligence technologies. The Company’s service offerings are configured and integrated with other platforms and enterprise applications. The Company delivers its service offerings via Internet browsers and on mobile devices. Its Customer Success Platform is a portfolio of service offerings providing sales force automation, customer service and support, marketing automation, digital commerce, community management, analytics, application development, IoT integration, collaborative productivity tools and its professional cloud services. Its cloud service offerings include Sales Cloud, Service Cloud, Marketing Cloud, Commerce Cloud, Community Cloud, Analytics Cloud, Salesforce Quip and Salesforce Platform.

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