Datawatch Corporation (NASDAQ: DWCH) and QAD (NASDAQ:QADA) are both small-cap enterprise software companies, but which is the superior business? We will contrast the two businesses based on the strength of their valuation, institutional ownership, analyst recommendations, dividends, profitability, risk and earnings.

Volatility & Risk

Datawatch Corporation has a beta of 0.96, meaning that its stock price is 4% less volatile than the S&P 500. Comparatively, QAD has a beta of 0.95, meaning that its stock price is 5% less volatile than the S&P 500.

Insider and Institutional Ownership

40.1% of Datawatch Corporation shares are owned by institutional investors. Comparatively, 43.3% of QAD shares are owned by institutional investors. 17.7% of Datawatch Corporation shares are owned by insiders. Comparatively, 44.1% of QAD shares are owned by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Analyst Recommendations

This is a summary of current recommendations for Datawatch Corporation and QAD, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Datawatch Corporation 0 1 1 0 2.50
QAD 0 1 4 0 2.80

Datawatch Corporation presently has a consensus price target of $10.00, indicating a potential downside of 3.38%. QAD has a consensus price target of $35.67, indicating a potential downside of 4.25%. Given Datawatch Corporation’s higher possible upside, equities research analysts clearly believe Datawatch Corporation is more favorable than QAD.

Dividends

QAD pays an annual dividend of $0.29 per share and has a dividend yield of 0.8%. Datawatch Corporation does not pay a dividend. QAD pays out -30.9% of its earnings in the form of a dividend.

Valuation & Earnings

This table compares Datawatch Corporation and QAD’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio NetIncome Earnings Per Share Price/Earnings Ratio
Datawatch Corporation $36.26 million 3.48 -$3.99 million ($0.33) -31.36
QAD $277.97 million 2.58 -$15.45 million ($0.94) -39.63

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

Profitability

This table compares Datawatch Corporation and QAD’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Datawatch Corporation -11.01% -6.84% -4.72%
QAD -5.98% -0.47% -0.20%

Summary

QAD beats Datawatch Corporation on 10 of the 15 factors compared between the two stocks.

Datawatch Corporation Company Profile

Datawatch Corporation is engaged in the design, development, marketing, distribution and support of business computer software primarily for the self-service data preparation and visual data discovery markets. The Company also provides services, including implementation and support of its software products, as well as training on their use and administration. The Company’s product family includes Datawatch Monarch, Datawatch Panopticon and Datawatch Report Mining Server (RMS). The Company offers its enterprise products through perpetual licenses and subscription pricing models. The Company also offers educational services for customers and partners implementing and learning about the platform, maintenance and support, and professional services to provide in-depth technical assistance for software implementations. The Company offers an array of live and virtual classroom instruction, including private onsite classes.

QAD Company Profile

QAD Inc. (QAD) is a provider of vertically oriented enterprise software solutions for global manufacturing companies across the automotive, life sciences, consumer products, food and beverage, high technology and industrial products industries. QAD Enterprise Applications enables measurement and control of business processes and supports operational requirements, including financials, manufacturing, demand and supply chain planning, customer management, business intelligence and business process management. QAD delivers components of its solution for a range of mobile platforms. The Company’s mobile suite includes a requisition approval solution, a mobile business intelligence solution, mobile browse capability and mobile application monitoring tools to support system administrators. Its mobile browse capability allows users to view, filter and sort data accessible through QAD Browses within QAD Enterprise Applications using mobile devices.

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