Comparing Red Hat (RHT) and Its Competitors

Red Hat (NYSE: RHT) is one of 118 publicly-traded companies in the “Software” industry, but how does it contrast to its peers? We will compare Red Hat to similar businesses based on the strength of its dividends, earnings, valuation, profitability, analyst recommendations, risk and institutional ownership.

Institutional & Insider Ownership

94.0% of Red Hat shares are owned by institutional investors. Comparatively, 61.0% of shares of all “Software” companies are owned by institutional investors. 0.7% of Red Hat shares are owned by company insiders. Comparatively, 17.8% of shares of all “Software” companies are owned by company 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.

Earnings and Valuation

This table compares Red Hat and its peers top-line revenue, earnings per share and valuation.

Gross Revenue EBITDA Price/Earnings Ratio
Red Hat $2.64 billion $489.77 million 72.96
Red Hat Competitors $1.52 billion $446.91 million 40.35

Red Hat has higher revenue and earnings than its peers. Red Hat is trading at a higher price-to-earnings ratio than its peers, indicating that it is currently more expensive than other companies in its industry.

Analyst Ratings

This is a breakdown of current ratings and target prices for Red Hat and its peers, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Red Hat 0 9 22 0 2.71
Red Hat Competitors 263 2001 4262 84 2.63

Red Hat presently has a consensus target price of $112.48, indicating a potential downside of 7.13%. As a group, “Software” companies have a potential upside of 4.04%. Given Red Hat’s peers higher probable upside, analysts plainly believe Red Hat has less favorable growth aspects than its peers.

Profitability

This table compares Red Hat and its peers’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Red Hat 11.49% 25.27% 7.43%
Red Hat Competitors -43.22% -25.22% -9.86%

Volatility & Risk

Red Hat has a beta of 1.25, suggesting that its share price is 25% more volatile than the S&P 500. Comparatively, Red Hat’s peers have a beta of 0.98, suggesting that their average share price is 2% less volatile than the S&P 500.

Summary

Red Hat beats its peers on 10 of the 13 factors compared.

About Red Hat

Red Hat, Inc. (Red Hat) provides open source software solutions, using a community-powered approach to develop and offer operating system, virtualization, management, middleware, cloud, mobile and storage technologies. Red Hat operates through three geographical segments: the Americas, including the United States, Canada and Latin America; EMEA, including Europe, Middle East and Africa, and Asia Pacific. Its products and services include infrastructure-related offerings, application development-related and other technology offerings, and consulting, support and training services. Its infrastructure-related offerings include Red Hat Enterprise Linux, Red Hat Satellite and Red Hat Enterprise Virtualization. Its application development-related and other technology offerings include Red Hat JBoss Middleware, Red Hat cloud offerings, Red Hat Mobile and Red Hat Storage. Its consulting services include upgrade planning, platform migrations, solution integration and application development.

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