SPS Commerce (SPSC) and Medidata Solutions (MDSO) Critical Analysis

SPS Commerce (NASDAQ:SPSC) and Medidata Solutions (NASDAQ:MDSO) are both business services companies, but which is the better stock? We will compare the two companies based on the strength of their profitability, dividends, valuation, risk, institutional ownership, analyst recommendations and earnings.

Analyst Recommendations

This is a breakdown of current ratings and price targets for SPS Commerce and Medidata Solutions, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
SPS Commerce 0 1 7 0 2.88
Medidata Solutions 0 4 7 0 2.64

SPS Commerce presently has a consensus price target of $84.14, suggesting a potential downside of 7.49%. Medidata Solutions has a consensus price target of $88.36, suggesting a potential upside of 26.50%. Given Medidata Solutions’ higher probable upside, analysts plainly believe Medidata Solutions is more favorable than SPS Commerce.

Profitability

This table compares SPS Commerce and Medidata Solutions’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
SPS Commerce 0.61% 4.25% 3.56%
Medidata Solutions 9.13% 11.37% 5.63%

Valuation and Earnings

This table compares SPS Commerce and Medidata Solutions’ revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
SPS Commerce $220.57 million 7.21 -$2.44 million $0.42 216.57
Medidata Solutions $545.53 million 7.64 $44.38 million $0.85 82.18

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

Risk and Volatility

SPS Commerce has a beta of 0.75, suggesting that its stock price is 25% less volatile than the S&P 500. Comparatively, Medidata Solutions has a beta of 1.44, suggesting that its stock price is 44% more volatile than the S&P 500.

Institutional and Insider Ownership

95.1% of SPS Commerce shares are held by institutional investors. 3.6% of SPS Commerce shares are held by insiders. Comparatively, 4.7% of Medidata Solutions shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Summary

Medidata Solutions beats SPS Commerce on 10 of the 13 factors compared between the two stocks.

SPS Commerce Company Profile

SPS Commerce, Inc. provides cloud-based supply chain management solutions worldwide. It provides solutions through the SPS Commerce platform, a cloud-based product suite that enhances the way retailers, suppliers, distributors, logistics firms, and other trading partners manage and fulfill orders, manage sell-through performance, and source new items. The company offers Trading Partner Fulfillment solution, which provides fulfillment automation and replaces or augments an organization's existing trading partner electronic communication infrastructure; Trading Partner Analytics solution that comprises data analytics applications to enhance visibility and analysis of customers supply chains; and Trading Partner Assortment solution to manage individual attributes associated with each item a retailer or supplier sells. It also provides Trading Partner Sourcing solution that enables retailers to source providers of new items, suppliers to connect with new retailers, and retailing community; Trading Partner Community Development solution, which offers communications programs that enables retailers, suppliers, and emerging providers of value-added products and services to establish trading partner relationships with new trading partners to expand their businesses; and Other Trading Partner Solutions, such as barcode labeling, planogram services, and scan and pack application that helps trading partners process information to streamline the picking and packaging process. The company sells its solutions primarily through retail sales professionals and supplier sales representatives to small- to mid-sized suppliers in the consumer packaged goods industry, as well as retailers, distributors, third-party logistics providers, and other trading partners. The company was formerly known as St. Paul Software, Inc. and changed its name to SPS Commerce, Inc. in May 2001. SPS Commerce, Inc. was incorporated in 1987 and is headquartered in Minneapolis, Minnesota.

Medidata Solutions Company Profile

Medidata Solutions, Inc. provides cloud-based solutions for life sciences worldwide. It offers the Medidata Clinical Cloud, a platform, pioneering analytics, and clinical technology for the development of new therapies. The company's platform solutions include data capture and management and trial planning and management. It also provides professional services, such as implementation, sponsor enablement, strategic consulting, partner and ongoing support, and e-learning and training. The company markets and sells its cloud-based solutions through a direct sales force, as well as through relationships with contract research organizations (CROs) and other strategic partners. It serves pharmaceutical, biotechnology, medical device, and diagnostics companies; academic research centers, government, and other non-profit organizations; and CROs and other entities engaged in clinical trials. Medidata Solutions, Inc. was founded in 1999 and is headquartered in New York, New York.

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