Cloudera Or Altair Engineering, Which To Choose?

Altair Engineering’s stock (NASDAQ: ALTR) is up by 39% since December 2018. On the other hand, peer Cloudera’s stock (NYSE: CLDR) is up merely 8% during the same period. This, despite the fact that Cloudera’s revenue growth for FY 2020 (ended January 2020) stood at 66%, compared to just 16% for Altair in the same period. We believe Altair Engineering is likely a strong investment right now. Our dashboard Cloudera vs. Altair Engineering: Does The Stock Price Movement Make Sense?, has the underlying numbers.

The primary reason is, Altair’s profit margins (net income as a percentage of sales), are much better at -1.6% versus -42.4% for Cloudera, which we believe explains the difference in the growth in Altair’s stock when compared to Cloudera. The $7.5 million loss for Altair was primarily due to a one-time tax expense of $8.6 million pertaining to U.S. effect of foreign operations. 

Note: We have compared the fundamentals of both companies for the last 2 years (2018-2019 for Altair’s as it follows calendar year convention while FY2019-2020 for Cloudera’s as it ends its financial year in January)

How Do The Core Businesses For Altair Engineering And Cloudera Compare?

Let’s look at the core business prospects a bit more closely. Cloudera offers a multi-function data management and analytics software solution, which includes flow management, streams management, data engineering, data warehousing, streaming analytics, operational databases, and machine learning. The software is implemented primarily in the data centers or on public cloud infrastructure of Amazon Web Services (AWS), Microsoft Azure (Azure), Google Cloud Platform (GCP), IBM Cloud, and Oracle Cloud. The company focuses on large corporations and had around 1900 customers at the end of January 2020.

Altair Engineering provides software and cloud solutions in the areas of product design and development, high performance computing, and data analytics. The focus through its engineering, simulation, and data analytics software is to help the customers to enhance product performance, compress development time, and reduce costs. The company is more diversified and targets customers from individuals to large corporations through its various products and had around 11K customers at the end of December 2019. The company also has a diversified revenue mix with US contributing the highest at 47% in the previous year.

To recap, we believe that Altair is likely to outperform Cloudera, in the medium-to-long-run primarily due to better Net Income margin and better revenue diversification.

While Altair Engineering looks like a better investment option compared to Cloudera in the long run, which S&P 500 component stocks have the best chance of outperforming the benchmark index? Our 5 In the S&P 500 That’ll Beat The Index: TWTR, ISRG, NFLX, NOW, V look promising.

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