Critical Survey: Telos (NASDAQ:TLS) and Stem (NYSE:STEM)

Stem (NYSE:STEM) and Telos (NASDAQ:TLS) are both small-cap computer and technology companies, but which is the superior business? We will contrast the two businesses based on the strength of their analyst recommendations, profitability, risk, institutional ownership, valuation, dividends and earnings.

Institutional and Insider Ownership

61.6% of Stem shares are held by institutional investors. Comparatively, 62.1% of Telos shares are held by institutional investors. 10.2% of Stem shares are held by insiders. Comparatively, 14.9% of Telos shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Profitability

This table compares Stem and Telos’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Stem	62.20%	N/A	-21.71%
Telos	-20.47%	-26.12%	-19.88%

Valuation and Earnings

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

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Stem	$144.58 million	0.93	-$854.01 million	($13.63)	-1.18
Telos	$108.27 million	3.96	-$52.52 million	($0.41)	-14.20

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

Analyst Recommendations

This is a summary of recent recommendations for Stem and Telos, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Stem	1	6	0	0	1.86
Telos	1	3	2	0	2.17

Stem presently has a consensus price target of $16.00, indicating a potential downside of 0.60%. Telos has a consensus price target of $7.75, indicating a potential upside of 33.16%. Given Telos’ stronger consensus rating and higher probable upside, analysts plainly believe Telos is more favorable than Stem.

Volatility & Risk

Stem has a beta of 1.35, suggesting that its share price is 35% more volatile than the S&P 500. Comparatively, Telos has a beta of 1.07, suggesting that its share price is 7% more volatile than the S&P 500.

Summary

Telos beats Stem on 9 of the 14 factors compared between the two stocks.

About Stem

Stem, Inc. operates as a digitally connected, intelligent, and renewable energy storage network provider worldwide. The company offers energy storage hardware sourced from original equipment manufacturers (OEMs); edge hardware to aid in the collection of site data and real-time operation and control of the site and other optional equipment; and Athena, a software platform, which offers battery hardware and software-enabled services to operate the energy storage systems. It serves commercial and industrial enterprises, independent power producers, renewable project developers, and utilities and grid operators. The company was incorporated in 2009 and is headquartered in San Francisco, California.

About Telos

Telos Corporation, together with its subsidiaries, provides cyber, cloud, and enterprise security solutions worldwide. The company operates in two segments, Security Solutions and Secure Networks. It provides Xacta, a platform for enterprise cyber risk management and security compliance automation; and consulting, assessment and compliance, engineering and evaluation, operations, and penetration testing services. The company also offers Telos Automated Message Handling System, a web-based organizational message distribution and management for mission-critical communications used by military field operatives; and Telos Advanced Cyber Analytics solution, which is a threat feed source of global Internet Protocol addresses known to engage in potentially malicious activity, including mass scanning and generic opportunistic attacks; and Telos Ghost, a solution to eliminate cyberattack surfaces by obfuscating and encrypting data, masking user identity and location, and hiding network resources, as well as provides security and privacy for intelligence gathering, cyber threat protection, securing critical infrastructure, and protecting communications and applications. In addition, the company provides IDTrust360, an enterprise digital trusted identity risk platform for extending flexible hybrid cloud identity services; and ONYX, a touchless fingerprint biometric solution for mobile devices. Further, it offers secure mobility solutions that enable remote work and minimize operational and security concerns across and beyond the enterprise; and network management and defense services for operating, administrating, and defending complex enterprise networks and services for defensive cyber operations. It serves the United States federal government, large commercial businesses, state and local governments, and international customers. Telos Corporation was founded in 1968 and is headquartered in Ashburn, Virginia.