Splunk Inc. (SPLK) and Intuit Inc. (INTU) are two widely known software and cloud-based solutions providers in the U. S. and internationally. SPLK offers Splunk Enterprise, Splunk Cloud, Splunk IT Service Intelligence, Splunk App for Amazon Web Services, and other platforms. INTU operates in segments such as Small Business & Self-Employed, Consumer, and Strategic Partner.
The cloud computing industry, which is underpinning the global economy, supply chains, and remote workforces amid the COVID-19 pandemic, is an essential service provider to businesses that are trying to achieve greater scalability, business continuity and cost efficiency. As organizations everywhere managed to keep their businesses functioning by having personnel work from their homes, principal cloud providers such as SPLK and INTU witnessed substantial growth in their revenues. The companies are innovating at a blistering pace.
While SPLK gained 425.1% over the past five years, INTU returned 342.8%. In terms of past six-month’s performance, INTU is the clear winner with 38.2% gains versus SPLK’s negative returns.
But which of these stocks is a better pick now? Let’s find out.
On February 2, the Schall Law Firm and the Gross Law Firm filed a class-action lawsuit against SPLK on behalf of its shareholders. The lawsuit alleges that SPLK failed to disclose information pertinent to investors and that the company made false and misleading statements to the market, failing to close deals with large customers in the third quarter of fiscal 2021.
Also this month, SPLK and McLaren Racing entered a multi-year partnership extension to deploy its Data-to-Everything Platform to enhance performance across the McLaren Racing team. The SPLK brand will be represented on the McLaren Formula 1 team kits and race cars, which should further strengthen the company’s market reach.
Credit Karma expanded the availability of its new U.S. checking account to more members with INTU’s TurboTax platform this month. It is the first time the two companies have teamed up after INTU’s acquisition of Credit Karma in December last year.
In January, INTU launched an upgraded Mint App to help users more easily manage their finances and to better track their subscriptions. These improved features should help INTU to better serve its customers and provide better insights based on machine learning technology.
Recent Financial Results
In the third quarter ended October 31, 2020, SPLK’s total revenue declined 11% year-over-year to $558.57 million. Its gross profit declined 18.7% from the year-ago value to $421.79 million. The company reported an operating loss of $165.52 million and a net loss of $201.53 million. However, SPLK’s cloud ARR has increased 71% year-over-year to $630 million over this period.
INTU’s total revenue has increased 14% year-over-year to $1.32 billion in the fiscal first quarter ended October 31, 2020. The company’s net income grew 247.4% from the prior-year quarter to $198 million, while its EPS grew 240.9% year-over-year to $0.75. Its cash and cash equivalents have increased 196.1% from the year-ago value to $5.46 billion.
INTU has an edge over SPLK here.
Past and Expected Financial Performance
SPLK’s revenue grew at a CAGR of 25.3% over the past three years. Also, the CAGR of the company’s total assets has been 46.6% over the same period.
Analysts expect SPLK’s revenue to increase 20.7% next year. The company’s EPS is expected to grow 69.2% in 2022. Moreover, its EPS is expected to grow at a rate of 4% per annum over the next five years.
In comparison, , INTU’s revenue grew at a CAGR of 13.9% over the past three years. The CAGR of the company’s total assets has been 33.7% over the same period.
Analysts expect INTU’s revenue to increase 15.5% next year. The company’s EPS is expected to grow 16.5% in 2022. Moreover, INTU’s EPS is expected to grow at a rate of 14% per annum over the next five years.
INTU’s trailing-12-month revenue is more than three times SPLK’s. Also, , INTU is more profitable with a gross profit margin of 83.1% versus SPLK’s 76.9%.
In fact, INTU’s ROE and ROA of 44.3% and 18.7%, respectively, compare favorably with SPLK’s negative returns.
In terms of trailing-12-month price/sales, INTU is currently trading at 14.09x, 19.7% more expensive than SPLK, which is currently trading at 11.77x. Also, its trailing-12-month ev/sales of 14.47x is 17.4% higher than SPLK’s 12.33x.
Though INTU looks expensive compared to SPLK, it’s worth paying this premium considering INTU’s higher earnings growth potential.
SPLK has an overall rating of D, which translates to a Sell in our proprietary POWR Ratings system. However, INTU has an overall rating of B which represents a Buy. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.
INTU has a Quality Grade of A, which is consistent with its higher-than-industry EBIT margin. In comparison, SPLK has a Quality Grade of C.
Both SPLK and INTU have a B grade for Momentum, which is consistent with their price returns over the past five years.
In terms of Value Grade, both SPLK and INTU have a C, which is consistent with their higher-than-industry EV/Sales ratio.
Beyond what I’ve stated above, our POWR Ratings system also rates both SPLK and INTU for Growth, Stability, and Sentiment. Get all SPLK’s ratings here. Also, click here to see the additional POWR Ratings for INTU.
While both SPLK and INTU are good long-term investments considering their market dominance and continued expansion, INTU appears to be a better buy based on the factors discussed here.
Even though SPLK remains one of the fastest growing software companies, its lower profitability and weaker financials make it a riskier investment option compared to INTU. Our research shows that the odds of success increase if you bet on stocks with an Overall POWR Rating of Buy or Strong Buy.
The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.
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INTU shares were trading at $415.95 per share on Wednesday afternoon, down $6.31 (-1.49%). Year-to-date, INTU has gained 9.68%, versus a 4.95% rise in the benchmark S&P 500 index during the same period.
About the Author: Imon Ghosh
Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization. More...
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