Critical Comparison: Shopify (NYSE:SHOP) and SolarWinds (NYSE:SWI)

Shopify (NYSE:SHOP) and SolarWinds (NYSE:SWI) are both computer and technology companies, but which is the better investment? We will compare the two businesses based on the strength of their earnings, risk, analyst recommendations, institutional ownership, dividends, valuation and profitability.

Analyst Recommendations

This is a summary of current recommendations for Shopify and SolarWinds, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Shopify	1	15	21	0	2.54
SolarWinds	0	5	0	0	2.00

Shopify presently has a consensus price target of $76.49, indicating a potential upside of 14.93%. SolarWinds has a consensus price target of $13.80, indicating a potential upside of 17.00%. Given SolarWinds’ higher probable upside, analysts clearly believe SolarWinds is more favorable than Shopify.

Volatility & Risk

Shopify has a beta of 2.27, indicating that its share price is 127% more volatile than the S&P 500. Comparatively, SolarWinds has a beta of 0.96, indicating that its share price is 4% less volatile than the S&P 500.

Insider & Institutional Ownership

69.3% of Shopify shares are held by institutional investors. Comparatively, 94.0% of SolarWinds shares are held by institutional investors. 2.0% of SolarWinds shares are held 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.

Valuation & Earnings

This table compares Shopify and SolarWinds’ gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Shopify	$7.06 billion	12.15	$132.00 million	($0.17)	-391.47
SolarWinds	$766.08 million	2.59	-$9.11 million	$0.07	168.50

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

Profitability

This table compares Shopify and SolarWinds’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Shopify	-2.82%	7.36%	5.83%
SolarWinds	1.58%	6.47%	2.78%

Summary

Shopify beats SolarWinds on 8 of the 14 factors compared between the two stocks.

About Shopify

Shopify Inc., a commerce company, provides a commerce platform and services in Canada, the United States, Europe, the Middle East, Africa, the Asia Pacific, Australia, China, and Latin America. The company's platform enables merchants to displays, manages, markets, and sells its products through various sales channels, including web and mobile storefronts, physical retail locations, pop-up shops, social media storefronts, native mobile apps, buy buttons, and marketplaces; and enables to manage products and inventory, process orders and payments, fulfill and ship orders, new buyers and build customer relationships, source products, leverage analytics and reporting, manage cash, payments and transactions, and access financing. It also sells custom themes and apps, and registration of domain names; and merchant solutions, which include accepting payments, shipping, and securing working capital. The company was formerly known as Jaded Pixel Technologies Inc. and changed its name to Shopify Inc. in November 2011. Shopify Inc. was incorporated in 2004 and is headquartered in Ottawa, Canada.

About SolarWinds

SolarWinds Corporation provides information technology (IT) management software products in the United States and internationally. It provides a suite of network management software that offers real-time visibility into network utilization and bandwidth, as well as the ability to detect, diagnose, and resolve network performance problems; and a suite of infrastructure management products, which monitors and analyzes the performance of applications and their supporting infrastructure, including servers, physical, virtual and cloud infrastructure, storage, and databases. The company also provides automated network configuration, log and event management, security information and event management, access rights management, identity monitoring, server configuration monitoring and patching, and secure gateway and file transfer products; a suite of application performance management software that enables visibility into log data, cloud infrastructure metrics, applications, tracing, and digital experiences; and service management software that offers ITIL-compliant service desk solutions for various companies. In addition, it offers a suite of database performance management software that monitors, analyzes, diagnoses, and optimizes database performance and operations for the Microsoft data platform, as well as other database management system platforms; traditional, open-source, and cloud-native databases hosted on-premises, in the cloud, and hybrid models. It markets and sells its products directly to network and systems engineers, database administrators, storage administrators, DevOps, SecOps, and service desk professionals. The company was formerly known as SolarWinds Parent, Inc. and changed its name to SolarWinds Corporation in May 2018. SolarWinds Corporation was founded in 1999 and is headquartered in Austin, Texas.