Critical Review: CDW (NASDAQ:CDW) & Science Applications International (NASDAQ:SAIC)

CDW (NASDAQ:CDW) and Science Applications International (NASDAQ:SAIC) are both computer and technology companies, but which is the better stock? We will contrast the two companies based on the strength of their dividends, institutional ownership, risk, earnings, profitability, valuation and analyst recommendations.

Dividends

CDW pays an annual dividend of $2.50 per share and has a dividend yield of 1.5%. Science Applications International pays an annual dividend of $1.48 per share and has a dividend yield of 1.4%. CDW pays out 31.1% of its earnings in the form of a dividend. Science Applications International pays out 17.9% 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. CDW has raised its dividend for 10 consecutive years. CDW is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Institutional & Insider Ownership

93.2% of CDW shares are owned by institutional investors. Comparatively, 76.0% of Science Applications International shares are owned by institutional investors. 0.8% of CDW shares are owned by company insiders. Comparatively, 0.7% of Science Applications International shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company will outperform the market over the long term.

Analyst Ratings

This is a summary of recent ratings and recommmendations for CDW and Science Applications International, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
CDW	0	4	2	0	2.33
Science Applications International	0	0	0	0	0.00

CDW currently has a consensus price target of $202.00, indicating a potential upside of 22.95%. Given CDW’s stronger consensus rating and higher possible upside, research analysts clearly believe CDW is more favorable than Science Applications International.

Profitability

This table compares CDW and Science Applications International’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
CDW	4.92%	53.63%	8.58%
Science Applications International	5.35%	33.36%	9.90%

Valuation & Earnings

This table compares CDW and Science Applications International”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
CDW	$21.88 billion	0.98	$1.08 billion	$8.05	20.41
Science Applications International	$7.48 billion	0.65	$362.00 million	$8.26	12.88

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

Volatility & Risk

CDW has a beta of 0.98, suggesting that its stock price is 2% less volatile than the S&P 500. Comparatively, Science Applications International has a beta of 0.49, suggesting that its stock price is 51% less volatile than the S&P 500.

Summary

CDW beats Science Applications International on 13 of the 17 factors compared between the two stocks.

About CDW

CDW Corporation provides information technology (IT) solutions in the United States, the United Kingdom, and Canada. It operates through three segments: Corporate, Small Business, and Public. The company offers discrete hardware and software products and services, as well as integrated IT solutions, including on-premise and cloud capabilities across hybrid infrastructure, digital experience, and security. It also provides hardware products comprising notebooks/mobile devices, tablets, network communications, desktop computers, collaboration, data storage and servers, and others; and software products, such as cloud solutions, software assurance, application suites, security, virtualization, operating systems, and network management. In addition, the company offers advisory and design, software development, implementation, managed, professional, configuration, partner, and telecom services, as well as warranties; delivers and manages mission critical software, systems, and network solutions; and implementation and installation, and repair services to its customers through various third-party service providers. It serves government, education, and healthcare customers; and small, medium, and large business customers. CDW Corporation was founded in 1984 and is headquartered in Vernon Hills, Illinois.

About Science Applications International

Science Applications International Corporation provides technical, engineering, and enterprise information technology (IT) services primarily in the United States. The company’s offerings include engineering; technology integration; IT modernization; maintenance of ground and maritime systems; logistics; training and simulation; operation and program support services; and end-to-end services, such as design, development, integration, deployment, management and operations, sustainment, and security of its customers’ IT infrastructure, as well as cloud migration, managed services, infrastructure modernization, and enterprise IT-as-a-service solutions. It serves the U.S. military comprising Army, Air Force, Navy, Marines, and Coast Guard; Department of Defense agencies; National Aeronautics and Space Administration; the U.S. Department of State; Department of Justice; Department of Homeland Security; and various intelligence community agencies, as well as U.S. federal civilian agencies. The company was formerly known as SAIC Gemini, Inc. and changed its name to Science Applications International Corporation in September 2013. Science Applications International Corporation was founded in 1969 and is headquartered in Reston, Virginia.