Critical Analysis: Zscaler (NASDAQ:ZS) versus D-Wave Quantum (NASDAQ:QBTS)

D-Wave Quantum (NASDAQ:QBTS) and Zscaler (NASDAQ:ZS) are both technology companies, but which is the superior stock? We will compare the two businesses based on the strength of their valuation, institutional ownership, earnings, risk, profitability, analyst recommendations and dividends.

Profitability

This table compares D-Wave Quantum and Zscaler’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
D-Wave Quantum	-2,001.59%	-26.67%	-24.03%
Zscaler	-1.88%	1.23%	0.40%

Volatility and Risk

D-Wave Quantum has a beta of 2.18, indicating that its share price is 118% more volatile than the S&P 500. Comparatively, Zscaler has a beta of 0.94, indicating that its share price is 6% less volatile than the S&P 500.

Analyst Recommendations

This is a summary of recent ratings and price targets for D-Wave Quantum and Zscaler, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
D-Wave Quantum	1	2	13	0	2.75
Zscaler	1	7	35	0	2.79

D-Wave Quantum currently has a consensus price target of $36.27, indicating a potential upside of 207.87%. Zscaler has a consensus price target of $239.78, indicating a potential upside of 15.62%. Given D-Wave Quantum’s higher possible upside, equities research analysts plainly believe D-Wave Quantum is more favorable than Zscaler.

Earnings & Valuation

This table compares D-Wave Quantum and Zscaler”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
D-Wave Quantum	$24.59 million	177.21	-$355.06 million	($0.71)	-16.59
Zscaler	$3.35 billion	10.09	-$63.18 million	($0.39)	-531.74

Zscaler has higher revenue and earnings than D-Wave Quantum. Zscaler is trading at a lower price-to-earnings ratio than D-Wave Quantum, indicating that it is currently the more affordable of the two stocks.

Institutional and Insider Ownership

42.5% of D-Wave Quantum shares are held by institutional investors. Comparatively, 46.5% of Zscaler shares are held by institutional investors. 1.3% of D-Wave Quantum shares are held by insiders. Comparatively, 17.2% of Zscaler shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock will outperform the market over the long term.

Summary

Zscaler beats D-Wave Quantum on 10 of the 14 factors compared between the two stocks.

About D-Wave Quantum

D-Wave Quantum Inc. develops and delivers quantum computing systems, software, and services worldwide. The company offers Advantage, a fifth-generation quantum computer; Ocean, a suite of open-source python tools; and Leap, a cloud-based service that provides real-time access to a live quantum computer, as well as access to Advantage, hybrid solvers, the Ocean software development kit, live code, demos, learning resources, and a vibrant developer community. It also provides D-Wave Launch, a quantum professional service that guides enterprises from problem discovery through production implementation. The company's quantum solutions are used in logistics, financial services, drug discovery, materials sciences, scheduling, fault detection, mobility, and supply chain management. It serves financial services, manufacturing/logistics, mobility, and life sciences/pharmaceuticals industries. D-Wave Quantum Inc. was founded in 1999 and is headquartered in Burnaby, Canada.

About Zscaler

Zscaler, Inc. operates as a cloud security company worldwide. The company offers Zscaler Internet Access solution that provides users, workloads, IoT, and OT devices secure access to externally managed applications, including software-as-a-service (SaaS) applications and internet destinations; and Zscaler Private Access solution, which is designed to provide access to managed applications hosted internally in data centers, and private or public clouds. It also provides Zscaler Digital Experience that measures end-to-end user experience across business applications, as well as provides an easy-to-understand digital experience score for each user, application, and location within an enterprise. In addition, the company offers Posture Control solutions comprising Cloud Security Posture Management that identifies and remediates application misconfigurations in SaaS, infrastructure as a service, and PaaS to reduce risk and ensure compliance with industry and organizational benchmarks; Cloud Infrastructure Entitlement Management that detects and remediates excessive or unused cloud permissions and enforces least privileged access without disrupting productivity; Infrastructure as Code (IaC), which analyzes IaC templates to identify misconfigurations and other security issues prior to deployment to cloud infrastructure; and Vulnerability Scanning and Data Loss Prevention solutions. Its platform modules include Zscaler Central Authority, Zscaler Enforcement Node, and Zscaler Log Servers. The company serves customers in airlines and transportation, conglomerates, consumer goods and retail, financial services, healthcare, manufacturing, media and communications, public sector and education, technology, and telecommunications services industries. The company was formerly known as SafeChannel, Inc., and changed its name to Zscaler, Inc. in August 2008. Zscaler, Inc. was incorporated in 2007 and is headquartered in San Jose, California.