Reviewing Zscaler (NASDAQ:ZS) and Sprout Social (NASDAQ:SPT)

Sprout Social (NASDAQ:SPT) and Zscaler (NASDAQ:ZS) are both technology companies, but which is the superior stock? We will contrast the two companies based on the strength of their valuation, analyst recommendations, earnings, institutional ownership, profitability, risk and dividends.

Analyst Ratings

This is a breakdown of recent ratings and price targets for Sprout Social and Zscaler, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Sprout Social	2	3	3	1	2.33
Zscaler	1	6	34	0	2.80

Sprout Social presently has a consensus target price of $10.43, indicating a potential downside of 8.28%. Zscaler has a consensus target price of $213.10, indicating a potential upside of 19.86%. Given Zscaler’s stronger consensus rating and higher possible upside, analysts plainly believe Zscaler is more favorable than Sprout Social.

Risk & Volatility

Sprout Social has a beta of 0.95, indicating that its stock price is 5% less volatile than the S&P 500. Comparatively, Zscaler has a beta of 0.95, indicating that its stock price is 5% less volatile than the S&P 500.

Profitability

This table compares Sprout Social and Zscaler’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Sprout Social	-6.13%	-8.80%	-3.64%
Zscaler	-2.44%	-0.37%	-0.12%

Valuation and Earnings

This table compares Sprout Social and Zscaler”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Sprout Social	$457.55 million	1.51	-$43.33 million	($0.50)	-22.74
Zscaler	$2.67 billion	10.76	-$41.48 million	($0.48)	-370.42

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

Institutional & Insider Ownership

46.5% of Zscaler shares are owned by institutional investors. 9.6% of Sprout Social shares are owned by company insiders. Comparatively, 17.2% of Zscaler shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Summary

Zscaler beats Sprout Social on 12 of the 14 factors compared between the two stocks.

About Sprout Social

Sprout Social, Inc. designs, develops, and operates a web-based social media management platform in the Americas, Europe, the Middle East, Africa, and the Asia Pacific. The company provides cloud software for social messaging, data and workflows in a unified system of record, intelligence, and action. It offers integrated tools, such as social engagement/response; publishing; reporting and analytics; social listening and business intelligence; reputation management; social commerce; employee advocacy; and automation and workflows. In addition, the company provides smart inbox, social customer relationship management, social monitoring and alerts, customer service tools, and automation; and centralized content planning, creation, and publishing, automated scheduling, content performance reporting, suggested content, message approval workflows, publishing permissions and governance, and content and asset libraries. Further, it offers social media; content performance, customer service and team, custom report builder, and reporting API; and market research, brand health, competitive insights, consumer trends, and product feedback; and social commerce, reputation management, employee advocacy, mobile applications, and chat bot creation and management. Additionally, the company offers professional services consisting of consulting and training services. It serves social and community management; public relations; marketing; influencer marketing; customer service and care; commerce, sales and customer acquisition; recruiting and hiring, product development, and business strategy; and small-and-medium-sized businesses, mid-market companies, enterprises, marketing agencies, government, non-profit, and educational institutions. Sprout Social, Inc. was incorporated in 2010 and is headquartered in Chicago, Illinois.

About Zscaler

Zscaler, Inc. operates as a cloud security company worldwide. The company offers Zscaler Internet Access solution that provides users, workloads, IoT, and OT devices secure access to externally managed applications, including software-as-a-service (SaaS) applications and internet destinations; and Zscaler Private Access solution, which is designed to provide access to managed applications hosted internally in data centers, and private or public clouds. It also provides Zscaler Digital Experience that measures end-to-end user experience across business applications, as well as provides an easy-to-understand digital experience score for each user, application, and location within an enterprise. In addition, the company offers Posture Control solutions comprising Cloud Security Posture Management that identifies and remediates application misconfigurations in SaaS, infrastructure as a service, and PaaS to reduce risk and ensure compliance with industry and organizational benchmarks; Cloud Infrastructure Entitlement Management that detects and remediates excessive or unused cloud permissions and enforces least privileged access without disrupting productivity; Infrastructure as Code (IaC), which analyzes IaC templates to identify misconfigurations and other security issues prior to deployment to cloud infrastructure; and Vulnerability Scanning and Data Loss Prevention solutions. Its platform modules include Zscaler Central Authority, Zscaler Enforcement Node, and Zscaler Log Servers. The company serves customers in airlines and transportation, conglomerates, consumer goods and retail, financial services, healthcare, manufacturing, media and communications, public sector and education, technology, and telecommunications services industries. The company was formerly known as SafeChannel, Inc., and changed its name to Zscaler, Inc. in August 2008. Zscaler, Inc. was incorporated in 2007 and is headquartered in San Jose, California.