CDK Global (CDK) and SAP (SAP) Head-To-Head Review

CDK Global (NASDAQ: CDK) and SAP (NYSE:SAP) are both mid-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, institutional ownership, risk, valuation, earnings and analyst recommendations.

Dividends

CDK Global pays an annual dividend of $0.60 per share and has a dividend yield of 0.9%. SAP pays an annual dividend of $0.98 per share and has a dividend yield of 0.9%. CDK Global pays out 29.1% of its earnings in the form of a dividend. SAP pays out 28.9% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. SAP is clearly the better dividend stock, given its higher yield and lower payout ratio.

Valuation and Earnings

This table compares CDK Global and SAP’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
CDK Global $2.22 billion 4.26 $295.60 million $2.06 33.38
SAP $24.42 billion 5.63 $3.85 billion $3.39 32.97

SAP has higher revenue and earnings than CDK Global. SAP is trading at a lower price-to-earnings ratio than CDK Global, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares CDK Global and SAP’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
CDK Global 13.42% 515.77% 13.57%
SAP 15.80% 15.43% 8.93%

Institutional & Insider Ownership

86.7% of CDK Global shares are owned by institutional investors. Comparatively, 25.0% of SAP shares are owned by institutional investors. 0.4% of CDK Global shares are owned by company insiders. Comparatively, 7.4% of SAP shares are owned by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Volatility and Risk

CDK Global has a beta of 0.75, indicating that its stock price is 25% less volatile than the S&P 500. Comparatively, SAP has a beta of 1.14, indicating that its stock price is 14% more volatile than the S&P 500.

Analyst Recommendations

This is a summary of recent ratings and target prices for CDK Global and SAP, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
CDK Global 0 1 3 0 2.75
SAP 1 3 12 0 2.69

CDK Global presently has a consensus target price of $73.00, suggesting a potential upside of 6.17%. SAP has a consensus target price of $104.90, suggesting a potential downside of 6.15%. Given CDK Global’s stronger consensus rating and higher possible upside, research analysts plainly believe CDK Global is more favorable than SAP.

Summary

SAP beats CDK Global on 11 of the 16 factors compared between the two stocks.

CDK Global Company Profile

CDK Global, Inc. provides integrated information technology and digital marketing solutions. The Company’s segments include Retail Solutions North America, Advertising North America and CDK International. Through its Retail Solutions North America segment, the Company provides technology-based solutions, including automotive Website platforms, that help automotive retailers, original equipment manufacturers (OEMs) and other industry participants manage the acquisition, sale, financing, insuring, parts supply, repair and maintenance of vehicles. Through its Advertising North America segment, the Company provides advertising solutions, including management of digital advertising spend, for OEMs and automotive retailers. As of June 30, 2016, through its CDK International segment, it provided technology-based solutions similar to the retail solutions provided in its Retail Solutions North America segment in approximately 100 countries outside of the United States and Canada.

SAP Company Profile

SAP SE (SAP) is a software and service provider. The Company offers enterprise application software. The Company operates through two segments: Applications, Technology & Services segment, and the SAP Business Network segment. The Applications, Technology & Services segment is engaged in the sale of software licenses, subscriptions to its cloud applications, and related services (primarily support services and various professional services, and support services, as well as implementation services of its software products and education services on the use of its products). The SAP Business Network segment includes its cloud-based collaborative business networks and services relating to the SAP Business Network (including cloud applications, professional services and education services). Within the SAP Business Network segment, the Company markets and sells the cloud offerings developed by SAP Ariba, SAP Fieldglass and Concur.

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