Critical Review: Zayo Group Holdings (ZAYO) versus Allot Communications (ALLT)

Allot Communications (NASDAQ: ALLT) and Zayo Group Holdings (NYSE:ZAYO) are both computer and technology companies, but which is the superior investment? We will contrast the two companies based on the strength of their valuation, earnings, profitability, risk, institutional ownership, analyst recommendations and dividends.

Profitability

This table compares Allot Communications and Zayo Group Holdings’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Allot Communications -14.06% -5.88% -4.75%
Zayo Group Holdings 1.53% 5.47% 0.96%

Analyst Ratings

This is a summary of current ratings for Allot Communications and Zayo Group Holdings, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Allot Communications 0 2 0 0 2.00
Zayo Group Holdings 1 6 11 0 2.56

Allot Communications currently has a consensus price target of $5.00, indicating a potential upside of 2.04%. Zayo Group Holdings has a consensus price target of $37.75, indicating a potential upside of 11.62%. Given Zayo Group Holdings’ stronger consensus rating and higher probable upside, analysts plainly believe Zayo Group Holdings is more favorable than Allot Communications.

Institutional & Insider Ownership

42.3% of Allot Communications shares are owned by institutional investors. Comparatively, 74.4% of Zayo Group Holdings shares are owned by institutional investors. 5.8% of Zayo Group Holdings shares are owned by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Valuation & Earnings

This table compares Allot Communications and Zayo Group Holdings’ top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Allot Communications $82.41 million 1.97 -$7.57 million ($0.34) -14.41
Zayo Group Holdings $2.07 billion 4.02 $935.90 million $0.12 281.83

Zayo Group Holdings has higher revenue and earnings than Allot Communications. Allot Communications is trading at a lower price-to-earnings ratio than Zayo Group Holdings, indicating that it is currently the more affordable of the two stocks.

Risk & Volatility

Allot Communications has a beta of 0.54, suggesting that its stock price is 46% less volatile than the S&P 500. Comparatively, Zayo Group Holdings has a beta of 0.56, suggesting that its stock price is 44% less volatile than the S&P 500.

Summary

Zayo Group Holdings beats Allot Communications on 13 of the 13 factors compared between the two stocks.

Allot Communications Company Profile

Allot Communications Ltd. (Allot) is a global provider of security and monetization solutions that enable mobile, fixed and enterprise service providers to protect and personalize the digital experience. The Company has a global and diverse customer base composed of mobile and fixed broadband service providers, cable operators, private networks, data centers, governments and enterprises, such as financial and educational institutions. Its integrated solutions include analytics, traffic management, video caching and optimization, policy control and charging, service enablement and security solutions. The Allot Service Gateway platforms (including Allot Service Gateway Tera, and Allot Service Gateway 9500), as well as Allot NetEnforcer platforms are based on technology, designed for in-line deployment in a range of networks. Allot service Gateway platforms are designed for deployment both on traditional and virtualized network access infrastructure.

Zayo Group Holdings Company Profile

Zayo Group Holdings, Inc. provides communications infrastructure services, including fiber and bandwidth connectivity, colocation and cloud infrastructure to a range of businesses. The Company operates in five segments: Dark Fiber Solutions, Network Connectivity, Colocation and Cloud Infrastructure, Zayo Canada and Other. Its products include leased dark fiber, fiber to cellular towers and small cell sites, wavelength connections, Ethernet, Internet Protocol (IP) connectivity and cloud services. Its products and services enable high-bandwidth applications, such as cloud-based computing, video, mobile, social media and machine-to-machine connectivity. As of March 1, 2017, the Company operated 8,100 route miles of long haul fiber and 4,000 miles of dense metro fiber across Denver, Minneapolis, Phoenix, Portland, Seattle, Sacramento, San Francisco, San Jose, Salt Lake City, Spokane and Boise, with on-net connectivity to over 3,100 enterprise buildings and 100 data centers.

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