Shotspotter (NASDAQ:SSTI) and 2U (NASDAQ:TWOU) are both small-cap business services companies, but which is the better stock? We will contrast the two companies based on the strength of their valuation, dividends, risk, institutional ownership, earnings, analyst recommendations and profitability.

Earnings and Valuation

This table compares Shotspotter and 2U’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Shotspotter $34.75 million 9.69 -$2.72 million ($0.26) -112.77
2U $411.77 million 2.55 -$38.33 million ($0.63) -26.35

Shotspotter has higher earnings, but lower revenue than 2U. Shotspotter is trading at a lower price-to-earnings ratio than 2U, indicating that it is currently the more affordable of the two stocks.

Analyst Ratings

This is a summary of recent ratings for Shotspotter and 2U, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Shotspotter 0 4 6 0 2.60
2U 0 12 3 0 2.20

Shotspotter currently has a consensus price target of $50.26, indicating a potential upside of 71.42%. 2U has a consensus price target of $47.23, indicating a potential upside of 184.52%. Given 2U’s higher probable upside, analysts plainly believe 2U is more favorable than Shotspotter.

Profitability

This table compares Shotspotter and 2U’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Shotspotter -2.87% -4.86% -2.13%
2U -11.39% -7.63% -5.91%

Institutional and Insider Ownership

66.3% of Shotspotter shares are held by institutional investors. 11.4% of Shotspotter shares are held by insiders. Comparatively, 4.9% of 2U shares are held by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.

Volatility & Risk

Shotspotter has a beta of 2.51, suggesting that its share price is 151% more volatile than the S&P 500. Comparatively, 2U has a beta of 0.83, suggesting that its share price is 17% less volatile than the S&P 500.

Summary

Shotspotter beats 2U on 11 of the 14 factors compared between the two stocks.

About Shotspotter

ShotSpotter, Inc. provides precision-policing and security solutions for law enforcement and security personnel in the United States and South Africa. Its solutions include ShotSpotter Flex, a public safety solution, which serves cities and municipalities to identify, locate, and deter gun violence by incorporating a real-time gunshot detection system into their policing systems; and ShotSpotter Missions, a cloud-based patrol management solution to help police departments plan patrol missions and tactics for crime deterrence. The company also provides ShotSpotter SecureCampus that helps the law enforcement and security personnel serving universities, colleges, and other educational institutions to mitigate risk and enhance security by notifying authorities and first responders of an active-shooter. In addition, it offers ShotSpotter SiteSecure, which serves customers, such as corporations to safeguard their facilities; and public agencies focused on protecting critical infrastructure, including train stations, airports, and freeways. The company sells its solutions through its direct sales teams. ShotSpotter, Inc. was founded in 1996 and is headquartered in Newark, California.

About 2U

2U, Inc. operates as an education technology company in the United States, Hong Kong, South Africa, and the United Kingdom. The company operates through two segments, Graduate Program Segment and Short Course Segment. It offers front-end technology and services, including online learning platform, student and faculty and immersion support, accessibility, admissions application advising, in-program student field placements, and faculty recruiting. The company provides back-end technology and services comprising graduate program launch and operations applications, university systems integration applications, content management system, admission application processing portal, customer relationship management, content development, student acquisition, and state authorization services. The company was formerly known as 2Tor Inc. and changed its name to 2U, Inc. in October 2012. 2U, Inc. was founded in 2008 and is headquartered in Lanham, Maryland.

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