Financial Analysis: SPS Commerce (SPSC) and Splunk (SPLK)

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SPS Commerce (NASDAQ: SPLK) and Splunk (NASDAQ:SPLK) are both business services companies, but which is the superior stock? We will compare the two companies based on the strength of their earnings, institutional ownership, risk, analyst recommendations, valuation, dividends and profitability.

Institutional and Insider Ownership

98.5% of SPS Commerce shares are held by institutional investors. Comparatively, 93.0% of Splunk shares are held by institutional investors. 3.6% of SPS Commerce shares are held by insiders. Comparatively, 0.4% of Splunk shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Analyst Ratings

This is a summary of current ratings and price targets for SPS Commerce and Splunk, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
SPS Commerce 0 1 7 0 2.88
Splunk 1 4 31 0 2.83

SPS Commerce presently has a consensus target price of $83.83, suggesting a potential downside of 11.70%. Splunk has a consensus target price of $109.94, suggesting a potential upside of 5.55%. Given Splunk’s higher possible upside, analysts clearly believe Splunk is more favorable than SPS Commerce.

Valuation & Earnings

This table compares SPS Commerce and Splunk’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
SPS Commerce $220.57 million 7.52 -$2.44 million $0.42 226.05
Splunk $1.27 billion 11.88 -$259.10 million ($1.31) -79.51

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

Risk and Volatility

SPS Commerce has a beta of 0.72, meaning that its share price is 28% less volatile than the S&P 500. Comparatively, Splunk has a beta of 1.81, meaning that its share price is 81% more volatile than the S&P 500.

Profitability

This table compares SPS Commerce and Splunk’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
SPS Commerce 0.61% 4.25% 3.56%
Splunk -20.72% -29.90% -13.68%

Summary

SPS Commerce beats Splunk on 9 of the 14 factors compared between the two stocks.

SPS Commerce Company Profile

SPS Commerce, Inc. provides cloud-based supply chain management solutions worldwide. It provides solutions through the SPS Commerce platform, a cloud-based product suite that enhances the way retailers, suppliers, distributors, logistics firms, and other trading partners manage and fulfill orders, manage sell-through performance, and source new items. The company offers Trading Partner Fulfillment solution, which provides fulfillment automation and replaces or augments an organization's existing trading partner electronic communication infrastructure; Trading Partner Analytics solution that comprises data analytics applications to enhance visibility and analysis of customers supply chains; and Trading Partner Assortment solution to manage individual attributes associated with each item a retailer or supplier sells. It also provides Trading Partner Sourcing solution that enables retailers to source providers of new items, suppliers to connect with new retailers, and retailing community; Trading Partner Community Development solution, which offers communications programs that enables retailers, suppliers, and emerging providers of value-added products and services to establish trading partner relationships with new trading partners to expand their businesses; and Other Trading Partner Solutions, such as barcode labeling, planogram services, and scan and pack application that helps trading partners process information to streamline the picking and packaging process. The company sells its solutions primarily through retail sales professionals and supplier sales representatives to small- to mid-sized suppliers in the consumer packaged goods industry, as well as retailers, distributors, third-party logistics providers, and other trading partners. The company was formerly known as St. Paul Software, Inc. and changed its name to SPS Commerce, Inc. in May 2001. SPS Commerce, Inc. was incorporated in 1987 and is headquartered in Minneapolis, Minnesota.

Splunk Company Profile

Splunk Inc. provides software solutions that enable organizations to gain real-time operational intelligence in the United States and internationally. Its products enable users to collect, index, search, explore, monitor, correlate, and analyze data regardless of format or source. The company offers Splunk Enterprise, a machine data platform with collection, indexing, search, reporting, analysis, alerting, monitoring, and data management capabilities; and Splunk Cloud. The company also provides Splunk Light, which offers log search and analysis for small IT environments; and Splunk Analytics for Hadoop, a software for exploring, analyzing, and visualizing data stored in Hadoop and Amazon S3. In addition, it offers Splunk Enterprise Security that addresses security threats and information; Splunk IT Service Intelligence, which monitors health and key performance indicators of critical IT services; Splunk User Behavior Analytics that detects cyber-attacks and insider threats; Splunk Machine Learning Toolkit, an app to apply machine learning techniques and algorithms to data stored in Splunk; Splunk App for AWS that collects and analyzes data from AWS data sources; and Splunk DB Connect to get business and enterprise context. Further, the company operates Splunkbase and Splunk Answers Websites, which provide an environment to share apps, collaborate on the use of its software, and provide community-based support and education, as well as offers application programming interfaces and software development kits. Additionally, it offers maintenance and customer support, training, and consulting and implementation services. The company serves cloud and online services, education, financial services, government, healthcare/pharmaceuticals, industrials/manufacturing, media/entertainment, retail/ecommerce, technology, and telecommunications industries. Splunk Inc. was incorporated in 2003 and is headquartered in San Francisco, California.

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