Radware (NASDAQ: RDWR) and Rosetta Stone (NYSE:RST) are both small-cap computer and technology companies, but which is the better stock? We will contrast the two businesses based on the strength of their profitability, dividends, earnings, valuation, risk, analyst recommendations and institutional ownership.

Profitability

This table compares Radware and Rosetta Stone’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Radware -5.74% -2.27% -1.55%
Rosetta Stone -6.06% -926.26% -4.89%

Volatility and Risk

Radware has a beta of 1.01, suggesting that its stock price is 1% more volatile than the S&P 500. Comparatively, Rosetta Stone has a beta of 0.74, suggesting that its stock price is 26% less volatile than the S&P 500.

Insider & Institutional Ownership

60.7% of Radware shares are owned by institutional investors. Comparatively, 73.4% of Rosetta Stone shares are owned by institutional investors. 21.6% of Radware shares are owned by insiders. Comparatively, 13.0% of Rosetta Stone shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company is poised for long-term growth.

Analyst Recommendations

This is a breakdown of current ratings and target prices for Radware and Rosetta Stone, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Radware 0 0 6 0 3.00
Rosetta Stone 0 0 1 0 3.00

Radware presently has a consensus price target of $20.83, indicating a potential upside of 7.11%. Rosetta Stone has a consensus price target of $15.00, indicating a potential upside of 39.93%. Given Rosetta Stone’s higher possible upside, analysts clearly believe Rosetta Stone is more favorable than Radware.

Earnings & Valuation

This table compares Radware and Rosetta Stone’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio NetIncome Earnings Per Share Price/Earnings Ratio
Radware $196.59 million 4.30 -$8.65 million ($0.26) -74.80
Rosetta Stone $194.09 million 1.23 -$27.55 million ($0.42) -25.52

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

Summary

Radware beats Rosetta Stone on 10 of the 12 factors compared between the two stocks.

About Radware

Radware Ltd. is a provider of cyber security and application delivery solutions. The Company’s solutions incorporate Distributed Denial of Service protection, Web application firewall (WAF) and Application Delivery Controllers (ADC) technologies to enable its customers to provide cyber-attack mitigation solutions for a range of applications. The Company’s products and activities are focused on protecting against cyber-attacks and ensuring optimal application service level for enterprises’ and carriers’ data centers. Its solutions include application and network security, and application delivery. Its application and network Security products include DefensePro Attack Mitigation Device, AppWall Web Application Firewall, DefenseFlow Cyber Command and Control application, and DefensePipe Cloud Scrubbing Service. Its application delivery products include Alteon NG, LinkProof NG and FastView. Its management solutions include APSolute Vision, application performance monitoring and vDirect.

About Rosetta Stone

Rosetta Stone Inc. (Rosetta Stone) offers personalized language and reading programs. The Company’s solutions are used by schools, businesses, government organizations and individuals around the world. Its segments include Enterprise & Education, which derives revenues from sales to educational institutions, corporations and government agencies worldwide, and Consumer, which derives revenue from sales to individuals and retail partners. Its cloud-based programs allow users to learn online or on-the-go via tablet or smartphone, whether in a classroom, corporate setting, or personal learning environment. Its Fit Brains business offers personalized brain training programs. The Company offers courses in over 30 languages across formats, including Web-based software subscriptions, digital downloads, mobile applications, and perpetual compact disc packages. It also offers a portfolio of technology-based learning products for personal use to the global consumer.

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