Contrasting Palo Alto Networks (NASDAQ:PANW) & Zscaler (NASDAQ:ZS)

Palo Alto Networks (NASDAQ:PANW) and Zscaler (NASDAQ:ZS) are both large-cap computer and technology companies, but which is the better business? We will compare the two businesses based on the strength of their earnings, profitability, dividends, analyst recommendations, risk, valuation and institutional ownership.

Profitability

This table compares Palo Alto Networks and Zscaler’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Palo Alto Networks	13.95%	19.48%	5.77%
Zscaler	-1.52%	-0.59%	-0.18%

Analyst Ratings

This is a breakdown of current ratings and recommmendations for Palo Alto Networks and Zscaler, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Palo Alto Networks	2	13	27	0	2.60
Zscaler	0	8	28	1	2.81

Palo Alto Networks currently has a consensus target price of $208.00, indicating a potential upside of 3.23%. Zscaler has a consensus target price of $296.82, indicating a potential downside of 5.69%. Given Palo Alto Networks’ higher possible upside, equities analysts clearly believe Palo Alto Networks is more favorable than Zscaler.

Valuation and Earnings

This table compares Palo Alto Networks and Zscaler”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Palo Alto Networks	$8.03 billion	16.74	$2.58 billion	$1.75	115.14
Zscaler	$2.55 billion	19.24	-$57.71 million	($0.26)	-1,210.56

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

Volatility and Risk

Palo Alto Networks has a beta of 0.97, suggesting that its stock price is 3% less volatile than the S&P 500. Comparatively, Zscaler has a beta of 1.11, suggesting that its stock price is 11% more volatile than the S&P 500.

Insider & Institutional Ownership

79.8% of Palo Alto Networks shares are held by institutional investors. Comparatively, 46.5% of Zscaler shares are held by institutional investors. 2.5% of Palo Alto Networks shares are held by insiders. Comparatively, 18.1% of Zscaler shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Summary

Palo Alto Networks beats Zscaler on 9 of the 15 factors compared between the two stocks.

About Palo Alto Networks

Palo Alto Networks, Inc. provides cybersecurity solutions worldwide. The company offers firewall appliances and software; and Panorama, a security management solution for the global control of network security platform as a virtual or a physical appliance. It also provides subscription services covering the areas of threat prevention, malware and persistent threat, URL filtering, laptop and mobile device protection, DNS security, Internet of Things security, SaaS security API, and SaaS security inline, as well as threat intelligence, and data loss prevention. In addition, the company offers cloud security, secure access, security operations, and threat intelligence and security consulting; professional services, including architecture design and planning, implementation, configuration, and firewall migration; education services, such as certifications, as well as online and in-classroom training; and support services. It sells its products and services through its channel partners, as well as directly to medium to large enterprises, service providers, and government entities operating in various industries, including education, energy, financial services, government entities, healthcare, Internet and media, manufacturing, public sector, and telecommunications. Palo Alto Networks, Inc. was incorporated in 2005 and is headquartered in Santa Clara, California.

About Zscaler

Zscaler, Inc. operates as a cloud security company worldwide. The company offers Zscaler Internet Access solution that provides users, workloads, IoT, and OT devices secure access to externally managed applications, including software-as-a-service (SaaS) applications and internet destinations; and Zscaler Private Access solution, which is designed to provide access to managed applications hosted internally in data centers, and private or public clouds. It also provides Zscaler Digital Experience that measures end-to-end user experience across business applications, as well as provides an easy-to-understand digital experience score for each user, application, and location within an enterprise. In addition, the company offers Posture Control solutions comprising Cloud Security Posture Management that identifies and remediates application misconfigurations in SaaS, infrastructure as a service, and PaaS to reduce risk and ensure compliance with industry and organizational benchmarks; Cloud Infrastructure Entitlement Management that detects and remediates excessive or unused cloud permissions and enforces least privileged access without disrupting productivity; Infrastructure as Code (IaC), which analyzes IaC templates to identify misconfigurations and other security issues prior to deployment to cloud infrastructure; and Vulnerability Scanning and Data Loss Prevention solutions. Its platform modules include Zscaler Central Authority, Zscaler Enforcement Node, and Zscaler Log Servers. The company serves customers in airlines and transportation, conglomerates, consumer goods and retail, financial services, healthcare, manufacturing, media and communications, public sector and education, technology, and telecommunications services industries. The company was formerly known as SafeChannel, Inc., and changed its name to Zscaler, Inc. in August 2008. Zscaler, Inc. was incorporated in 2007 and is headquartered in San Jose, California.