Financial Analysis: HubSpot (HUBS) versus Microsoft (MSFT)

HubSpot (NYSE:HUBS) and Microsoft (NASDAQ:MSFT) are both computer and technology companies, but which is the better stock? We will compare the two businesses based on the strength of their institutional ownership, earnings, risk, profitability, dividends, analyst recommendations and valuation.

Profitability

This table compares HubSpot and Microsoft’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
HubSpot	-12.44%	-17.08%	-5.04%
Microsoft	28.31%	39.52%	13.16%

Risk & Volatility

HubSpot has a beta of 1.92, meaning that its share price is 92% more volatile than the S&P 500. Comparatively, Microsoft has a beta of 1.17, meaning that its share price is 17% more volatile than the S&P 500.

Institutional and Insider Ownership

95.0% of HubSpot shares are held by institutional investors. Comparatively, 71.7% of Microsoft shares are held by institutional investors. 9.6% of HubSpot shares are held by insiders. Comparatively, 1.4% of Microsoft shares are held by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Dividends

Microsoft pays an annual dividend of $1.84 per share and has a dividend yield of 1.6%. HubSpot does not pay a dividend. Microsoft pays out 47.4% of its earnings in the form of a dividend. Microsoft has increased its dividend for 15 consecutive years.

Valuation & Earnings

This table compares HubSpot and Microsoft’s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
HubSpot	$512.98 million	12.96	-$63.82 million	($1.02)	-164.55
Microsoft	$110.36 billion	7.93	$16.57 billion	$3.88	29.29

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

Analyst Recommendations

This is a summary of current ratings and recommmendations for HubSpot and Microsoft, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
HubSpot	0	8	10	0	2.56
Microsoft	1	1	27	1	2.93

HubSpot currently has a consensus target price of $169.75, suggesting a potential upside of 1.14%. Microsoft has a consensus target price of $122.64, suggesting a potential upside of 7.92%. Given Microsoft’s stronger consensus rating and higher possible upside, analysts clearly believe Microsoft is more favorable than HubSpot.

Summary

Microsoft beats HubSpot on 13 of the 18 factors compared between the two stocks.

HubSpot Company Profile

HubSpot, Inc. provides a cloud-based marketing and sales software platform for businesses in the Americas, Europe, and the Asia Pacific. Its software platform includes integrated applications, such as social media, search engine optimization, blogging, Website content management, marketing automation, email, sales productivity, CRM, analytics, and reporting. The company also offers professional, and phone and email-based support services. It serves mid-market business-to-business, and B2B companies. The company markets its product through inbound go-to-market approach, marketing agency, and sales partners. HubSpot, Inc. was founded in 2005 and is headquartered in Cambridge, Massachusetts.

Microsoft Company Profile

Microsoft Corporation develops, licenses, and supports software, services, devices, and solutions worldwide. Its company’s Productivity and Business Processes segment offers Office 365 commercial products and services for businesses, such as Office, Exchange, SharePoint, Skype for Business, Microsoft Teams, and related Client Access Licenses (CALs); Office 365 consumer services, including Skype, Outlook.com, and OneDrive; LinkedIn online professional network; and Dynamics business solutions comprising financial management, enterprise resource planning, customer relationship management, supply chain management, and analytics applications for small and medium businesses, large organizations, and divisions of enterprises. The company’s Intelligent Cloud segment licenses server products and cloud services, such as SQL Server, Windows Server, Visual Studio, System Center, and related CALs, as well as Azure, a cloud platform; and enterprise services, including premier support and Microsoft consulting services to assist customers in developing, deploying, and managing Microsoft server and desktop solutions, as well as provides training and certification to developers and IT professionals on Microsoft products. Its More Personal Computing segment offers Windows OEM, volume, and other non-volume licensing of the Windows operating system; patent licensing, Windows Internet of Things, and MSN display advertising; devices comprising Surface, PC accessories, and other intelligent devices; Xbox hardware and software and services; and Bing and Bing Ads search advertising. The company markets its products through original equipment manufacturers, distributors, and resellers; and online and Microsoft retail stores. Microsoft Corporation has collaboration with E.ON; strategic alliance with Nielsen Holdings plc and PAREXEL International Corp.; and a strategic collaboration with Mastercard Incorporated. The company was founded in 1975 and is headquartered in Redmond, Washington.

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