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Verint Systems vs. Zendesk: Which Software Stock is a Better Buy?

Because remote working is here to stay longer than expected, in-part owing to the resurgence of COVID-19 cases, the unabating need for efficient software solutions should benefit Zendesk (ZEN) and Verint (VRNT). But let’s find out which of these software stocks is a better buy now. Read on.

Zendesk, Inc. (ZEN) in San Francisco and Melville, N.Y.-based Verint Systems Inc. (VRNT) are two prominent players in the software industry. ZEN delivers software-as-a-service (SaaS) solutions to organizations. It provides a single customer service interface to organizations to manage their one-on-one customer interactions and track and predict common questions. VRNT provides customer engagement solutions by offering various applications for forecasting and scheduling, quality and compliance, and real-time work that supports in-the-moment workforce activities.

In the current economic recovery period, as most companies figure out how best to keep pace with changing consumer trends, having convenient and efficient remote customer support and engagement services is imperative. Heightened demand for safe and efficient software for connecting customers and analyzing data should benefit both ZEN and VRNT in the coming months. Furthermore, the global enterprise software market is expected to grow at 4.3% CAGR between 2021 - 2027.

In terms of the past year’s performance, ZEN is a winner with 43.6% gains versus VRNT’s negative returns. But, which of these stocks is a better pick now? Let’s find out.

Click here to check out our Software Industry Report for 2021

Latest Movements

On June 15, 2021, Yext, Inc. (YEXT), an AI search company, announced new integrations with ZEN as part of its continuing focus on empowering customer support teams on YEXT’s Yext Support Answers suite of enterprise solutions. ZEN is looking forward to a long-term partnership with YEXT by offering its popular customer support and AI search tools.

On August 10, 2021, VRNT announced the expansion of the digital-first capabilities of its cloud platform through the acquisition of Conversocial, a provider of social customer service software. The acquisition will expand VRNT’s robust support for digital customer engagement with connections to the most used messaging channels, while improving brand efficiency.

Recent Financial Results

ZEN’s revenue for its fiscal second quarter, ended June 30, 2021, increased 29% year-over-year to $318.22 million. The company’s non-GAAP gross profit has been reported at $258.60 million, representing a 34.1% year-over-year improvement. Its non-GAAP operating income came in at $22.62 million, up 18.1% from the prior-year period. While its non-GAAP net income increased 4.7% year-over-year to $17.13 million, its non-GAAP EPS declined 7.1% year-over-year to $0.13. The company had  $422.81 million in cash and cash equivalents  as of June 30, 2021.

For its fiscal first quarter ended April 30, 2021, VRNT’s non-GAAP revenue increased 6.8% year-over-year to $201.94 million. The company’s non-GAAP gross profit was$135.81 million, up 8% from the prior-year period. Its non-GAAP operating income has been reported $42.65 million for the quarter, up 13.9% from its year-ago period. VRNT’s non-GAAP net income came in at $33.03 million, representing a 26.9% year-over-year improvement. Its non-GAAP EPS increased 10% year-over-year to $0.44. As of June 30, 2021, the company had $359.42 million in cash and cash equivalents.

Past and Expected Financial Performance

ZEN’s revenue has increased at a 31.9% CAGR over the past three years. Analysts expect ZEN’s revenue to increase 27.7% year-over-year in the current year and 25.3% next year. Its EPS is expected to increase 27% in the current year and 57.2% next year. The stock’s EPS is expected to grow at a rate of 30% per annum over the next five years.

In comparison, VRNT’s revenue grew at a 3.5% CAGR over the past three years. Analysts expect VRNT’s revenue to decline 38% year-over-year in the current year but improve 13.7% next year. Its EPS is expected to decrease 32.9% in the current year and increase 6.2% next year. Analysts expect the stock’s EPS to grow at a 14% rate per annum over the next five years.


VRNT’s trailing-12-month revenue is 1.1 times ZEN’s. VRNT is also more profitable, with a 14.5% EBITDA margin versus ZEN’s negative value.

Also, VRNT’s respective ROE, ROA and ROTC values of 1.2%, 2.8%, and 3.6% compare favorably with ZEN’s  negative values.


In terms of non-GAAP forward P/E, ZEN is currently trading at 187.50x, which is 878.6% higher than VRNT’s 19.16x. Also, in terms of forward EV/EBITDA, ZEN’s 110.63x is 593.2% higher than VRNT’s 15.96x.

POWR Ratings

While ZEN has an overall C grade, which translates to Neutral in our proprietary POWR Ratings system, VRNT has an overall B grade, equating to Buy. The POWR Ratings are calculated considering 118 distinct factors, each weighted to an optimal degree.

Both ZEN and VRNT have a C grade for Momentum, which is in sync with their mixed price performance. ZEN has declined 12% over the past month. VRNT has declined marginally over the past month.

VRNT has a B grade for Value, which is consistent with its lower-than-industry valuation ratios. VRNT’s 3.18x forward Price/Sales is 20.3% lower than the 4x industry average. However, ZEN’s C grade for Value reflects its higher-than-industry valuation ratios. The company has an 11.37x forward Price/Sales, which is 184.5% higher than the 4x industry average.

Of the 144 stocks in the Software - Application industry, ZEN is ranked #86. In comparison, VRNT is ranked #14 of 58 stocks in the Software - Business industry.

Beyond what we’ve stated above, our POWR Ratings system has also rated both VRNT and ZEN for Sentiment, Growth, Stability, and Quality.

Get all ZEN ratings here. Also, click here to see the additional POWR Ratings for VRNT.

The Winner

Due to surging Delta variant cases, businesses are expected to continue remote working and the rising demand for cloud services and efficient customer support software should significantly benefit VRNT and ZEN. However, we think its relatively lower valuation and higher profitability make VRNT a better buy here.

Our research shows that the odds of success increase if one bets on stocks with an Overall POWR Rating of Buy or Strong Buy. Click here to access the top-rated stocks in the Software - Business industry, and here for those in the Software - Application  industry.

Click here to check out our Software Industry Report for 2021

ZEN shares were trading at $124.13 per share on Friday afternoon, up $0.30 (+0.24%). Year-to-date, ZEN has declined -13.27%, versus a 19.99% rise in the benchmark S&P 500 index during the same period.

About the Author: Sweta Vijayan

Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market.


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