Alphabet Inc Class A (NASDAQ: GOOGL) and Red Hat (NYSE:RHT) are both large-cap computer and technology companies, but which is the superior investment? We will compare the two businesses based on the strength of their institutional ownership, earnings, valuation, risk, profitability, analyst recommendations and dividends.

Risk & Volatility

Alphabet Inc Class A has a beta of 1.06, suggesting that its share price is 6% more volatile than the S&P 500. Comparatively, Red Hat has a beta of 1.07, suggesting that its share price is 7% more volatile than the S&P 500.

Insider & Institutional Ownership

33.4% of Alphabet Inc Class A shares are owned by institutional investors. Comparatively, 95.4% of Red Hat shares are owned by institutional investors. 13.2% of Alphabet Inc Class A shares are owned by insiders. Comparatively, 0.7% of Red Hat shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Analyst Ratings

This is a summary of current recommendations and price targets for Alphabet Inc Class A and Red Hat, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Alphabet Inc Class A 0 4 35 1 2.93
Red Hat 1 9 23 0 2.67

Alphabet Inc Class A currently has a consensus target price of $1,204.55, suggesting a potential upside of 3.74%. Red Hat has a consensus target price of $156.75, suggesting a potential downside of 10.89%. Given Alphabet Inc Class A’s stronger consensus rating and higher probable upside, equities analysts clearly believe Alphabet Inc Class A is more favorable than Red Hat.

Earnings and Valuation

This table compares Alphabet Inc Class A and Red Hat’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Alphabet Inc Class A $110.86 billion 7.28 $12.66 billion $32.05 36.23
Red Hat $2.92 billion 10.70 $258.80 million $2.30 76.48

Alphabet Inc Class A has higher revenue and earnings than Red Hat. Alphabet Inc Class A is trading at a lower price-to-earnings ratio than Red Hat, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Alphabet Inc Class A and Red Hat’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Alphabet Inc Class A 14.19% 15.58% 12.48%
Red Hat 8.86% 29.36% 8.50%

Summary

Alphabet Inc Class A beats Red Hat on 10 of the 15 factors compared between the two stocks.

About Alphabet Inc Class A

Alphabet Inc., through its subsidiaries, provides online advertising services in the United States and internationally. The company offers performance and brand advertising services. It operates through Google and Other Bets segments. The Google segment includes principal Internet products, such as Ads, Android, Chrome, Commerce, Google Cloud, Google Maps, Google Play, Hardware, Search, and YouTube, as well as technical infrastructure and newer efforts, including Virtual Reality. This segment also offers digital content, enterprise cloud services, and hardware products, as well as other miscellaneous products and services. The Other Bets segment includes businesses, such as Access, Calico, CapitalG, GV, Nest, Verily, Waymo, and X, as well as fiber Internet and Television services. Alphabet Inc. was founded in 1998 and is headquartered in Mountain View, California.

About Red Hat

Red Hat, Inc. provides open source software solutions to develop and offer operating system, virtualization, management, middleware, cloud, mobile, and storage technologies to various enterprises worldwide. It offers infrastructure-related solutions, such as Red Hat Enterprise Linux, an operating system platform that runs on hardware for use in hybrid cloud environments; Red Hat Satellite, a system management offering that helps to deploy, scale, and manage in hybrid cloud environments; and Red Hat Enterprise Virtualization, a software solution that allows customers to utilize and manage a common hardware infrastructure to run multiple operating systems and applications. The company offers application development-related and other technology solutions, such as Red Hat JBoss Middleware, a solution for developing, deploying, and managing applications; integrating applications, data, and devices; and automating business processes in hybrid cloud environments; The company's application development-related and other technology solutions also includes Red Hat cloud offerings, a software solution that enables customers to build and manage various cloud computing environments; Red Hat Mobile, a software development platform that enables customers to develop, integrate, deploy, and manage mobile applications for enterprises; and Red Hat Storage, a software solution that enables customers to manage large, unstructured, or semi-structured data in hybrid cloud environments. It also provides consulting, support, and training services; and realtime operating system, distributed computing, directory services, and user authentication. The company was formerly known as Red Hat Software, Inc. and changed its name to Red Hat, Inc. in June 1999. Red Hat, Inc. was founded in 1993 and is headquartered in Raleigh, North Carolina.

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