Guidewire Software (NYSE: GWRE) and Model N (NYSE:MODN) are both computer and technology companies, but which is the better investment? We will compare the two companies based on the strength of their earnings, profitability, valuation, institutional ownership, dividends, risk and analyst recommendations.

Risk and Volatility

Guidewire Software has a beta of 1.27, suggesting that its share price is 27% more volatile than the S&P 500. Comparatively, Model N has a beta of 1.13, suggesting that its share price is 13% more volatile than the S&P 500.

Institutional & Insider Ownership

65.9% of Model N shares are owned by institutional investors. 1.0% of Guidewire Software shares are owned by insiders. Comparatively, 20.4% of Model N shares are owned by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.

Analyst Ratings

This is a breakdown of current ratings and recommmendations for Guidewire Software and Model N, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Guidewire Software 0 3 5 1 2.78
Model N 0 2 4 0 2.67

Guidewire Software presently has a consensus price target of $75.29, suggesting a potential downside of 0.56%. Model N has a consensus price target of $13.20, suggesting a potential downside of 2.58%. Given Guidewire Software’s stronger consensus rating and higher probable upside, analysts plainly believe Guidewire Software is more favorable than Model N.

Profitability

This table compares Guidewire Software and Model N’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Guidewire Software 2.19% 1.97% 1.69%
Model N -30.85% -52.59% -20.77%

Earnings & Valuation

This table compares Guidewire Software and Model N’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Guidewire Software $474.36 million 11.87 $25.35 million $0.14 540.79
Model N $124.07 million 3.18 -$29.98 million ($1.35) -10.04

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

Summary

Guidewire Software beats Model N on 12 of the 14 factors compared between the two stocks.

About Guidewire Software

Guidewire Software, Inc. is a provider of software products for property and casualty (P&C) insurers. The Company’s software serves as a technology platform for P&C insurance carriers. The Company’s InsurancePlatform consists of three elements: core transaction processing, data management and analytics, and digital engagement. The Company sells its products to a range of global P&C insurance carriers ranging from global insurers to national carriers to regional carriers. The Company’s core transaction processing includes Guidewire InsuranceSuite, Guidewire PolicyCenter, Guidewire ClaimCenter, Guidewire BillingCenter and InsuranceSuite Add-on Modules. The Company’s data management and analytics includes Guidewire DataHub, Guidewire InfoCenter, Guidewire Live and Guidewire Predictive Analytics. The Company’s digital engagement includes Guidewire Digital Portals.

About Model N

Model N, Inc. is a provider of revenue management solutions for life science and technology companies. The Company’s solutions enable its customers to maximize revenues and reduce revenue compliance risk by transforming their revenue life cycle from a series of tactical, disjointed operations into a strategic end-to-end process. The Company’s solutions include Revenue Enterprise Cloud, Revenue Intelligence Cloud and Revvy Revenue Management. The Company provides solutions that span the organizational and operational boundaries of functions, such as sales, marketing and finance, and serve as a system of record for revenue management processes, including pricing, contracts, rebates, incentives and regulatory compliance. The Company’s application suites are designed to work with enterprise resource planning (ERP) and customer relationship management (CRM) applications. The Company also offers implementation services, managed services, strategic services and customer support.

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