Critical Survey: Cloudflare (NYSE:NET) versus Guidewire Software (NYSE:GWRE)

Guidewire Software (NYSE:GWRE) and Cloudflare (NYSE:NET) are both large-cap computer and technology companies, but which is the better stock? We will compare the two businesses based on the strength of their profitability, dividends, risk, institutional ownership, valuation, earnings and analyst recommendations.

Analyst Ratings

This is a breakdown of current recommendations for Guidewire Software and Cloudflare, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Guidewire Software	1	2	11	0	2.71
Cloudflare	3	12	10	0	2.28

Guidewire Software currently has a consensus target price of $158.38, indicating a potential downside of 2.06%. Cloudflare has a consensus target price of $92.29, indicating a potential upside of 21.36%. Given Cloudflare’s higher probable upside, analysts plainly believe Cloudflare is more favorable than Guidewire Software.

Profitability

This table compares Guidewire Software and Cloudflare’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Guidewire Software	-1.11%	-1.19%	-0.74%
Cloudflare	-6.90%	-8.54%	-2.42%

Institutional & Insider Ownership

82.7% of Cloudflare shares are held by institutional investors. 0.4% of Guidewire Software shares are held by insiders. Comparatively, 12.8% of Cloudflare shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company is poised for long-term growth.

Valuation and Earnings

This table compares Guidewire Software and Cloudflare’s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Guidewire Software	$980.50 million	13.63	-$111.86 million	($0.13)	-1,244.00
Cloudflare	$1.48 billion	17.49	-$183.95 million	($0.53)	-143.49

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

Volatility and Risk

Guidewire Software has a beta of 1.18, meaning that its stock price is 18% more volatile than the S&P 500. Comparatively, Cloudflare has a beta of 1.1, meaning that its stock price is 10% more volatile than the S&P 500.

Summary

Guidewire Software beats Cloudflare on 8 of the 14 factors compared between the two stocks.

About Guidewire Software

Guidewire Software, Inc. provides a platform for property and casualty (P&C) insurers worldwide. The company offers Guidewire InsuranceSuite Cloud, such as PolicyCenter Cloud, BillingCenter Cloud, and ClaimCenter Cloud applications. It also provides Guidewire InsuranceNow, a cloud-based platform that offers policy, billing, and claims management functionality to insurers; and Guidewire InsuranceSuite for Self-Managed. In addition, the company offers Guidewire Rating Management to manage the pricing of insurance products; and Guidewire Reinsurance Management to use rules-based logic to execute reinsurance strategy through underwriting and claims processes. Further, it provides Guidewire Underwriting Management, a cloud-based integrated business application; Guidewire AppReader, a submission intake management solution; Guidewire ClaimCenter Package for the London market supports the claims workflow used by London Market insurers and brokers; Guidewire Digital Engagement Applications, which enable insurers to provide digital experiences to customers, agents, vendors, and field personnel through their device of choice; and Guidewire for Salesforce to provide customer information regarding policies and claims. Additionally, the company offers Guidewire Predict, a P&C-specific machine-learning platform; Guidewire HazardHub that allows insurers to understand, assess, price, and manage property risk; Guidewire Canvas, Guidewire Compare, and Guidewire Explore cloud-native applications; and Guidewire Cyence, a cyber-risk economic modeling product. The company was incorporated in 2001 and is headquartered in San Mateo, California.

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.