Contrasting Salesforce (NYSE:CRM) & RingCentral (NYSE:RNG)

RingCentral (NYSE:RNG) and Salesforce (NYSE:CRM) are both technology companies, but which is the better investment? We will compare the two companies based on the strength of their profitability, institutional ownership, analyst recommendations, dividends, risk, earnings and valuation.

Profitability

This table compares RingCentral and Salesforce’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
RingCentral	25.27%	-50.15%	14.82%
Salesforce	21.99%	24.90%	11.27%

Earnings & Valuation

This table compares RingCentral and Salesforce”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
RingCentral	$2.52 billion	2.52	$43.39 million	$7.56	9.92
Salesforce	$43.94 billion	4.07	$7.46 billion	$10.97	19.81

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

Analyst Ratings

This is a summary of recent recommendations and price targets for RingCentral and Salesforce, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
RingCentral	0	8	6	0	2.43
Salesforce	3	13	32	4	2.71

RingCentral presently has a consensus price target of $93.92, suggesting a potential upside of 25.18%. Salesforce has a consensus price target of $278.98, suggesting a potential upside of 28.35%. Given Salesforce’s stronger consensus rating and higher possible upside, analysts plainly believe Salesforce is more favorable than RingCentral.

Insider and Institutional Ownership

98.6% of RingCentral shares are held by institutional investors. Comparatively, 80.4% of Salesforce shares are held by institutional investors. 7.3% of RingCentral shares are held by company insiders. Comparatively, 3.5% of Salesforce shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company is poised for long-term growth.

Volatility and Risk

RingCentral has a beta of 1.05, meaning that its stock price is 5% more volatile than the S&P 500. Comparatively, Salesforce has a beta of 1.24, meaning that its stock price is 24% more volatile than the S&P 500.

Dividends

RingCentral pays an annual dividend of $0.50 per share and has a dividend yield of 0.7%. Salesforce pays an annual dividend of $1.76 per share and has a dividend yield of 0.8%. RingCentral pays out 6.6% of its earnings in the form of a dividend. Salesforce pays out 16.0% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Salesforce has raised its dividend for 1 consecutive years. Salesforce is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

Salesforce beats RingCentral on 13 of the 18 factors compared between the two stocks.

About RingCentral

RingCentral, Inc. provides cloud-based communications and collaboration services for businesses. Its offerings combine business phone service, video meetings, team messaging and related tools in a unified communications platform. The company also offers contact center services that help organizations manage customer interactions across channels, along with integrations with business software. Its services are delivered to organizations in multiple countries and regions. RingCentral was founded in 1999 by Vlad Shmunis, who serves as the company’s founder, chairman and chief executive officer.

About Salesforce

Salesforce, Inc. is a cloud-based software company best known for customer relationship management (CRM) tools. Its platform helps businesses manage sales, customer service, marketing, commerce and customer data, and includes products such as Sales Cloud, Service Cloud, Data Cloud and Agentforce. The company also offers Slack for workplace collaboration, Tableau for data analytics and visualization, and MuleSoft for connecting applications and data. Salesforce’s products are used by organizations across a range of industries and are available to customers around the world.