Critical Analysis: Qualys (NASDAQ:QLYS) and Cloudflare (NYSE:NET)

Cloudflare (NYSE:NET) and Qualys (NASDAQ:QLYS) are both computer and technology companies, but which is the superior business? We will compare the two companies based on the strength of their risk, analyst recommendations, valuation, profitability, dividends, earnings and institutional ownership.

Analyst Ratings

This is a summary of recent recommendations and price targets for Cloudflare and Qualys, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Cloudflare	3	10	14	1	2.46
Qualys	3	12	2	0	1.94

Cloudflare currently has a consensus target price of $145.92, suggesting a potential downside of 18.70%. Qualys has a consensus target price of $137.50, suggesting a potential downside of 2.98%. Given Qualys’ higher probable upside, analysts plainly believe Qualys is more favorable than Cloudflare.

Profitability

This table compares Cloudflare and Qualys’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Cloudflare	-4.72%	-5.52%	-1.67%
Qualys	28.59%	38.52%	18.71%

Risk and Volatility

Cloudflare has a beta of 1.84, meaning that its share price is 84% more volatile than the S&P 500. Comparatively, Qualys has a beta of 0.61, meaning that its share price is 39% less volatile than the S&P 500.

Institutional & Insider Ownership

82.7% of Cloudflare shares are held by institutional investors. Comparatively, 99.3% of Qualys shares are held by institutional investors. 12.8% of Cloudflare shares are held by insiders. Comparatively, 0.9% of Qualys shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock is poised for long-term growth.

Valuation and Earnings

This table compares Cloudflare and Qualys”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Cloudflare	$1.77 billion	35.15	-$78.80 million	($0.23)	-780.37
Qualys	$621.67 million	8.28	$173.68 million	$4.89	28.98

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

Summary

Qualys beats Cloudflare on 8 of the 15 factors compared between the two stocks.

About Cloudflare

Cloudflare, Inc. operates as a cloud services provider that delivers a range of services to businesses worldwide. The company provides an integrated cloud-based security solution to secure a range of combination of platforms, including public cloud, private cloud, on-premise, software-as-a-service applications, and IoT devices; and website and application security products comprising web application firewall, bot management, distributed denial of service, API gateways, SSL/TLS encryption, script management, security center, and rate limiting products. It offers website and application performance solutions, including content delivery, load balancing, DNS, agro smart routing, video stream delivery, web optimization, cache reserve, cloudfare waiting room, and cloudfare data localization suite; SASE platform through cloudfare one that provides a cloud-based network-as-a-service; network services which deliver network connectivity, security, and performance, including magic WAN, magic transit, magic firewall, cloudflare network interconnect, and spectrum. In addition, the company provides zero trust services, such as cloudflare access, cloudflare gateway, remote browser isolation, cloud access security broker, cloud email security, and data loss prevention products that protects, inspects, and provides privilege rules to grant access to data and application. Further, it provides developer-based solutions consisting of cloudflare workers, R2 object storage, workers KV, durable objects, cloudfare pages, cloudfare stream, and cloudfare images; and consumer products comprising of 1.1.1.1, a DNS resolver, WARP, a virtual private network, and cloudfare registrar that secures registration and management of domain names. The company serves customers in the technology, healthcare, financial services, consumer and retail, industrial, and non-profit industries, as well as government. Cloudflare, Inc. was incorporated in 2009 and is headquartered in San Francisco, California.

About Qualys

Qualys, Inc., together with its subsidiaries, provides cloud-based platform delivering information technology (IT), security, and compliance solutions in the United States and internationally. It offers Qualys Cloud Apps, which include Cybersecurity Asset Management and External Attack Surface Management; Vulnerability Management, Detection and Response; Web Application Scanning; Patch Management; Custom Assessment and Remediation; Multi-Vector Endpoint Detection and Response; Context Extended Detection and Response; Policy Compliance; File Integrity Monitoring; and Qualys TotalCloud, as well as Cloud Workload Protection, Cloud Detection and Response, Cloud Security Posture Management, Infrastructure as Code, and Container Security. The company's integrated suite of IT, security, and compliance solutions delivered on its Qualys' Enterprise TruRisk Platform enables customers to identify and manage IT assets; collect and analyze IT security data; discover and prioritize vulnerabilities; quantify cyber risk exposure; recommend and implement remediation actions; and verify the implementation of such actions. It also provides asset tagging and management, reporting and dashboards, questionnaires and collaboration, remediation and workflow, big data correlation and analytics engine, and alerts and notifications that enable clients to detect vulnerabilities, and measure and remediate cyber risk. The company offers its solutions to enterprises, government entities, and small and medium-sized businesses in various industries, including education, financial services, government, healthcare, insurance, manufacturing, media, retail, technology, and utilities through its sales teams, as well as through its network of channel partners, such as security consulting organizations, managed service providers, resellers, cloud providers, and consulting firms. Qualys, Inc. was incorporated in 1999 and is headquartered in Foster City, California.