Red Hat (NYSE: RHT) and Gigamon (NYSE:GIMO) are both computer and technology companies, but which is the better business? We will contrast the two companies based on the strength of their institutional ownership, earnings, analyst recommendations, risk, profitability, dividends and valuation.

Valuation and Earnings

This table compares Red Hat and Gigamon’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Red Hat $2.41 billion 9.09 $253.70 million $1.83 67.17
Gigamon $310.86 million 4.63 $49.43 million ($0.04) -963.75

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

Volatility and Risk

Red Hat has a beta of 1.19, meaning that its share price is 19% more volatile than the S&P 500. Comparatively, Gigamon has a beta of 1.44, meaning that its share price is 44% more volatile than the S&P 500.

Profitability

This table compares Red Hat and Gigamon’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Red Hat 12.14% 26.23% 7.66%
Gigamon -0.32% -0.55% -0.38%

Analyst Recommendations

This is a breakdown of recent ratings for Red Hat and Gigamon, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Red Hat 1 8 22 0 2.68
Gigamon 0 9 1 0 2.10

Red Hat presently has a consensus target price of $125.31, indicating a potential upside of 1.94%. Gigamon has a consensus target price of $45.35, indicating a potential upside of 17.64%. Given Gigamon’s higher possible upside, analysts clearly believe Gigamon is more favorable than Red Hat.

Insider & Institutional Ownership

93.6% of Red Hat shares are owned by institutional investors. Comparatively, 96.6% of Gigamon shares are owned by institutional investors. 0.7% of Red Hat shares are owned by company insiders. Comparatively, 4.5% of Gigamon shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock will outperform the market over the long term.

Summary

Red Hat beats Gigamon on 10 of the 14 factors compared between the two stocks.

Red Hat Company Profile

Red Hat, Inc. (Red Hat) provides open source software solutions, using a community-powered approach to develop and offer operating system, virtualization, management, middleware, cloud, mobile and storage technologies. Red Hat operates through three geographical segments: the Americas, including the United States, Canada and Latin America; EMEA, including Europe, Middle East and Africa, and Asia Pacific. Its products and services include infrastructure-related offerings, application development-related and other technology offerings, and consulting, support and training services. Its infrastructure-related offerings include Red Hat Enterprise Linux, Red Hat Satellite and Red Hat Enterprise Virtualization. Its application development-related and other technology offerings include Red Hat JBoss Middleware, Red Hat cloud offerings, Red Hat Mobile and Red Hat Storage. Its consulting services include upgrade planning, platform migrations, solution integration and application development.

Gigamon Company Profile

Gigamon Inc. offers a solution that delivers visibility and control of data-in-motion traversing enterprise, federal and service provider networks. The Company’s Visibility Platform consists of a distributed system of nodes (that in combination establish a Visibility Fabric). The Visibility Platform includes physical appliances and virtual nodes that can be deployed in data centers, central offices, virtualized/private cloud/public cloud environments, and small form-factor remote site appliances, which in combination enable pervasive visibility of network infrastructures. Its GigaSECURE Security Delivery Platform enables security teams and information technology (IT) personnel to gain visibility into their IT infrastructure by forwarding selected traffic of interest from network, server and remote location infrastructure to security, management, analysis and compliance tools in a manner that is optimized for specific uses or functions.

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