Visa (NYSE: V) and Palo Alto Networks (NYSE:PANW) are both large-cap internet security & transactions services companies, but which is the better stock? We will compare the two companies based on the strength of their risk, analyst recommendations, institutional ownership, valuation, dividends, earnings and profitability.

Dividends

Visa pays an annual dividend of $0.66 per share and has a dividend yield of 0.6%. Palo Alto Networks does not pay a dividend. Visa pays out 24.5% of its earnings in the form of a dividend. Visa has increased its dividend for 8 consecutive years.

Profitability

This table compares Visa and Palo Alto Networks’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Visa 36.49% 31.80% 12.89%
Palo Alto Networks -12.57% -19.72% -4.89%

Risk and Volatility

Visa has a beta of 0.98, meaning that its stock price is 2% less volatile than the S&P 500. Comparatively, Palo Alto Networks has a beta of 1.02, meaning that its stock price is 2% more volatile than the S&P 500.

Analyst Ratings

This is a breakdown of recent ratings for Visa and Palo Alto Networks, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Visa 0 2 27 0 2.93
Palo Alto Networks 1 11 29 0 2.68

Visa presently has a consensus target price of $115.93, indicating a potential upside of 5.56%. Palo Alto Networks has a consensus target price of $161.18, indicating a potential upside of 12.94%. Given Palo Alto Networks’ higher probable upside, analysts clearly believe Palo Alto Networks is more favorable than Visa.

Insider and Institutional Ownership

82.5% of Visa shares are owned by institutional investors. Comparatively, 77.5% of Palo Alto Networks shares are owned by institutional investors. 0.1% of Visa shares are owned by company insiders. Comparatively, 4.8% of Palo Alto Networks shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company is poised for long-term growth.

Earnings and Valuation

This table compares Visa and Palo Alto Networks’ gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio NetIncome Earnings Per Share Price/Earnings Ratio
Visa $18.36 billion 12.42 $6.70 billion $2.69 40.83
Palo Alto Networks $1.76 billion 7.45 -$216.60 million ($2.39) -59.72

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

Summary

Visa beats Palo Alto Networks on 11 of the 16 factors compared between the two stocks.

About Visa

Visa Inc. (Visa) is a payments technology company that connects consumers, merchants, financial institutions, businesses, strategic partners and government entities to electronic payments. The Company operates through payment services segment. The Company enables global commerce through the transfer of value and information among the participants. The Company’s transaction processing network facilitates authorization, clearing and settlement of payment transactions and enables to provide its financial institution and merchant clients a range of products, platforms and value-added services. The Company is a retail electronic payment network based on payments volume, number of transactions and number of cards in circulation. Its products/services include core products, processing infrastructure, transaction processing services, digital products, merchant products, and risk products and payment security initiatives.

About Palo Alto Networks

Palo Alto Networks, Inc. offers a next-generation security platform. The Company’s security platform consists of three elements: Next-Generation Firewall, Advanced Endpoint Protection and Threat Intelligence Cloud. Its Next-Generation Firewall delivers application, user and content visibility and control, as well as protection against network-based cyber threats integrated within the firewall through its hardware and software architecture. Its Advanced Endpoint Protection prevents cyber attacks that run malicious code or exploit software vulnerabilities on a range of fixed and virtual endpoints and servers. Its Threat Intelligence Cloud provides central intelligence capabilities, security for software as a service applications and automated delivery of preventative measures against cyber attacks. Its products and services include firewall appliances, panorama, virtual system upgrades, subscription services, support and maintenance, and professional services.

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