Dropbox, Inc. (DBX) in San Francisco provides a collaboration platform worldwide, enabling users to create, access, organize, share, collaborate, and secure content. Its solutions include Dropbox paper, Dropbox Smart Sync, and Dropbox Showcase. Verb Technology Company, Inc. (VERB), in comparison, develops a Software-as-a-Service (SaaS) applications platform, and it offers verbCRM, verbTEAMS, verbLEARN, and verbLIVE. VERB is based in American Fork, Utah.
Despite increasing threats to data security, especially on cloud-based platforms, the SaaS market is expected to grow exponentially in the coming months on growing demand from almost every industry as part of broad digital transformation efforts by industry and a continuation of remote working. According to a Research and Markets report, the global SaaS market is expected to grow at a 10% CAGR between 2021 and 2023. So, both DBX and VERB should benefit from the growing market.
VERB has gained 109.8% over the past year, while DBX returned 44.5%. Also, VERB’s 76.7% gains over the past three months are significantly higher than DBX’s 16.1% returns. Moreover, in terms of the past month’s performance, VERB is the clear winner with 80.8% gains versus DBX’s 2.1%.
But which of these two stocks is a better buy now? Let’s find out.
Click here to check out our Software Industry Report for 2021
Latest Developments
On March 23, 2021, DBX completed the acquisition of DocSend, a secure document sharing and analytics company with more than 17,000 customers. The combination of DBX, HelloSign, and DocSend is expected to help users across industries manage end-to-end document workflows more efficiently.
On July 26, 2021, VERB introduced a new artificial intelligence (AI)-based feature —Pulse—to its sales enablement platform. Rory J. Cutaia, the company’s CEO, said, “Pulse greatly enhances user awareness to support customers more effectively, increases customer interactions and engagement, and facilitates greater communication more easily through the application. We believe the personal touch from these direct communications will result in increased sales.”
Recent Financial Results
DBX’s revenue increased 12% year-over-year to $511.60 million for its fiscal first quarter ended March 31, 2021. The company’s non-GAAP operating income grew 103% year-over-year to $148.60 million, while its non-GAAP net income increased 103.1% from the same period last year to $141.80 million. Its non-GAAP EPS came in at $0.35, up 105.9% year-over-year.
VERB’s revenue increased 7.3% year-over-year to $2.53 million for its fiscal first quarter ended March 31, 2021. The company’s loss from operations grew 141.7% year-over-year to $9.33 million. Its net loss increased 328.8% year-over-year to $8.34 million. Also, its loss per share came in at $0.16, down 30.4% year-over-year.
Past and Expected Financial Performance
VERB’s revenue and total assets have grown at CAGRs of 798% and 196.4%, respectively, over the past three years. Analysts expect VERB’s revenue to increase 28.2% for the quarter ending September 30, 2021, and 35.4% in its fiscal year 2021. The company’s EPS is expected to grow 44.4% for the quarter ending September 30, 2021, and 40% in fiscal 2021.
In comparison, DBX’s revenue and total assets have grown at CAGRs of 18.8% and 32%, respectively, over the past three years. The company’s revenue is expected to increase 11.2% for the quarter ending September 30, 2021, and 11% in fiscal 2021. Its EPS is expected to grow 23.1% for the quarter ending September 30, 2021, and 45.2% in fiscal 2021.
Profitability
DBX’s $1.97 billion trailing-12-month revenue is significantly higher than VERB’s $10.14 million. And DBX is more profitable, with respective 15.73% and 28.15% EBITDA and levered FCF margins, compared to VERB’s negative values.
Furthermore, DBX’s 3.22%, and 4.55% respective ROA and ROTC compare with VERB’s negative values.
Valuation
In terms of trailing-12-month P/S, VERB is currently trading at 9.86x, which is 53.8% higher than DBX’s 6.41x. Furthermore, VERB’s 15.15x trailing-12-month EV/Sales is 137.8% higher than DBX’s 6.37x.
So, DBX is the more affordable stock.
POWR Ratings
DBX has an overall B rating, which equates to Buy in our proprietary POWR Ratings system. In comparison, VERB has an overall F rating, which translates to Strong Sell. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.
DBX has a B grade for Growth, which is consistent with analysts’ expectations that its EPS will increase significantly in the current year. In contrast, VERB has a C Growth grade, which is consistent with analysts’ expectations that its EPS will increase this year but at a modest rate.
DBX has a B grade for Quality. This is justified given DBX's 15.73% trailing-12-month EBITDA margin, which is 9.6% higher than the 14.35% industry average. VERB has an F Quality grade, in sync with its negative value for trailing-12-month EBITDA margin versus the 14.35% industry average.
Of the 72 stocks in the Technology - Services industry, DBX is ranked #15. However, VERB is ranked #127 of 132 stocks in the Software - Application industry.
Beyond what we’ve stated above, we have also rated both the stocks for Stability, Momentum, Sentiment, and Value. Click here to view all the DBX ratings. Also, get all the VERB ratings here.
The Winner
Rapid digital advancements are expected to drive the SaaS market’s growth significantly. However, we think it is better to avoid VERB now and bet on DBX because of its better financials, lower valuation, and higher profitability.
Our research shows that odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all the other top-rated stocks in the Technology - Services industry here. Also, click here to access all the top-rated stocks in the Software - Application industry.
Click here to check out our Cloud Computing Industry Report for 2021
DBX shares fell $0.04 (-0.13%) in premarket trading Tuesday. Year-to-date, DBX has gained 38.98%, versus a 18.73% rise in the benchmark S&P 500 index during the same period.
About the Author: Nimesh Jaiswal
Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles.
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