Critical Survey: Cheetah Mobile (CMCM) & Open Text (OTEX)

Cheetah Mobile (NYSE: CMCM) and Open Text (NASDAQ:OTEX) are both computer and technology companies, but which is the superior business? We will contrast the two businesses based on the strength of their earnings, valuation, profitability, analyst recommendations, dividends, institutional ownership and risk.

Analyst Ratings

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This is a breakdown of current recommendations and price targets for Cheetah Mobile and Open Text, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Cheetah Mobile 1 3 0 0 1.75
Open Text 1 1 9 0 2.73

Cheetah Mobile presently has a consensus price target of $12.33, suggesting a potential upside of 1.26%. Open Text has a consensus price target of $44.60, suggesting a potential upside of 30.26%. Given Open Text’s stronger consensus rating and higher probable upside, analysts plainly believe Open Text is more favorable than Cheetah Mobile.

Risk and Volatility

Cheetah Mobile has a beta of 3.51, suggesting that its stock price is 251% more volatile than the S&P 500. Comparatively, Open Text has a beta of 0.33, suggesting that its stock price is 67% less volatile than the S&P 500.

Valuation and Earnings

This table compares Cheetah Mobile and Open Text’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Cheetah Mobile $764.61 million 2.29 -$11.59 million $1.42 8.58
Open Text $2.29 billion 3.97 $1.03 billion $0.71 48.23

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

Profitability

This table compares Cheetah Mobile and Open Text’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Cheetah Mobile 27.66% 40.78% 24.22%
Open Text 7.20% 6.82% 3.20%

Dividends

Open Text pays an annual dividend of $0.53 per share and has a dividend yield of 1.5%. Cheetah Mobile does not pay a dividend. Open Text pays out 74.6% of its earnings in the form of a dividend.

Institutional and Insider Ownership

5.9% of Cheetah Mobile shares are owned by institutional investors. Comparatively, 70.7% of Open Text shares are owned by institutional investors. 17.1% of Cheetah Mobile shares are owned by insiders. Comparatively, 10.6% of Open Text shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock will outperform the market over the long term.

Summary

Open Text beats Cheetah Mobile on 9 of the 16 factors compared between the two stocks.

Cheetah Mobile Company Profile

Cheetah Mobile Inc. is a holding company. The Company and its consolidated subsidiaries, variable interest entities (VIEs) and a VIE’s subsidiary are engaged in the provision of online marketing services, Internet value-added services, and Internet security services and others. The Company operates a platform that offers mobile and personal computer (PC) applications for its users and global content promotional channels for its customers, both of which are powered by its cloud-based data analytics engines. For its users, its diversified suite of applications optimizes mobile and PC Internet system performance, and provides real time protection against known and unknown security threats. Its data analytics engines perform real time analysis of mobile applications, program files and Websites on their devices for behavior that may impair system performance or impose security risks.

Open Text Company Profile

Open Text Corporation provides a platform and suite of software products and services that assist organizations in finding, utilizing, and sharing business information from any device. The Company designs, develops, markets and sells Enterprise Information Management (EIM) software and solutions. Its EIM offerings include Enterprise Content Management (ECM), Business Process Management (BPM), Customer Experience Management (CEM), Business Network, Discovery and Analytics. Its software and services allow organizations to manage the information that flows into, out of, and throughout the enterprise as part of daily operations. Its solutions incorporate collaborative and mobile technologies and are delivered for on-premises deployment, as well as through cloud, hybrid and managed hosted services models. In addition, the Company provides solutions that facilitate the exchange of information and transactions that occur between supply chain participants.

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