VeriSign (NASDAQ:VRSN) versus Infosys (NYSE:INFY) Critical Review

Infosys (NYSE:INFY) and VeriSign (NASDAQ:VRSN) are both large-cap technology companies, but which is the superior stock? We will contrast the two companies based on the strength of their valuation, analyst recommendations, risk, dividends, institutional ownership, earnings and profitability.

Institutional and Insider Ownership

16.2% of Infosys shares are held by institutional investors. Comparatively, 92.9% of VeriSign shares are held by institutional investors. 22.4% of Infosys shares are held by company insiders. Comparatively, 0.6% of VeriSign shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock will outperform the market over the long term.

Risk & Volatility

Infosys has a beta of 0.88, meaning that its share price is 12% less volatile than the S&P 500. Comparatively, VeriSign has a beta of 0.69, meaning that its share price is 31% less volatile than the S&P 500.

Analyst Ratings

This is a summary of current ratings and price targets for Infosys and VeriSign, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Infosys	1	10	0	0	1.91
VeriSign	0	2	4	0	2.67

Infosys currently has a consensus price target of $11.79, indicating a potential downside of 6.16%. VeriSign has a consensus price target of $352.00, indicating a potential upside of 14.58%. Given VeriSign’s stronger consensus rating and higher probable upside, analysts clearly believe VeriSign is more favorable than Infosys.

Earnings and Valuation

This table compares Infosys and VeriSign”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Infosys	$20.37 billion	2.50	$3.31 billion	$0.81	15.51
VeriSign	$1.66 billion	16.63	$825.70 million	$9.30	33.03

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

Profitability

This table compares Infosys and VeriSign’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Infosys	16.21%	34.81%	20.72%
VeriSign	49.06%	-38.40%	59.95%

Dividends

Infosys pays an annual dividend of $0.47 per share and has a dividend yield of 3.7%. VeriSign pays an annual dividend of $3.24 per share and has a dividend yield of 1.1%. Infosys pays out 58.0% of its earnings in the form of a dividend. VeriSign pays out 34.8% 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.

Summary

VeriSign beats Infosys on 10 of the 16 factors compared between the two stocks.

About Infosys

Infosys Ltd. is a digital services and consulting company, which engages in the provision of end-to-end business solutions. It operates through the following segments: Financial Services, Retail, Communication, Energy, Utilities, Resources, and Services, Manufacturing, Hi-Tech, Life Sciences, and All Other. The company was founded by Dinesh Krishnan Swamy, Senapathy Gopalakrishnan, Narayana Ramarao Nagavara Murthy, Raghavan N. S., Ashok Arora, Nandan M. Nilekani, and S. D. Shibulal on July 2, 1981 and is headquartered in Bangalore, India.

About VeriSign

VeriSign, Inc., together with its subsidiaries, provides domain name registry services and internet infrastructure that enables internet navigation for various recognized domain names worldwide. The company enables the security, stability, and resiliency of internet infrastructure and services, including providing root zone maintainer services, operating two of thirteen internet root servers; and offering registration services and authoritative resolution for the .com and .net domains, which supports global e-commerce. It operates directory for .name and .cc; and back-end systems for .edu, domain names. VeriSign, Inc. was incorporated in 1995 and is headquartered in Reston, Virginia.