In the rapidly evolving landscape of technology, two companies stand out: CDW Corporation and Zscaler, Inc. Both operate within the technology sector but focus on different areas—CDW in IT solutions and Zscaler in cloud security. Their innovative strategies and market overlap make them compelling subjects for comparison. As an investor, understanding the strengths and opportunities of each can significantly influence your portfolio decisions. Join me as I explore which of these companies presents the most intriguing investment opportunity.
Table of contents
Company Overview
CDW Overview
CDW Corporation is a leading provider of information technology (IT) solutions, primarily operating in the United States, the United Kingdom, and Canada. Founded in 1984, the company focuses on delivering a wide range of hardware, software, and integrated IT services. CDW serves diverse customer segments including government, education, and healthcare, alongside small, medium, and large businesses. Its offerings encompass discrete products, cloud solutions, and managed services, which are designed to enhance IT infrastructures. With a market capitalization of approximately $18.8B, CDW positions itself as a critical partner in digital transformation efforts, ensuring clients can navigate the complexities of modern IT environments.
Zscaler Overview
Zscaler, Inc. is a cloud security company that specializes in providing secure access to applications and services via its innovative platform. Established in 2007 and headquartered in San Jose, California, Zscaler’s primary offerings include Zscaler Internet Access and Zscaler Private Access, both designed to secure user access to cloud and on-premises applications. With a market capitalization nearing $39.1B, Zscaler addresses the growing demand for secure digital experiences across diverse industries, ranging from financial services to healthcare. The company emphasizes a zero-trust security model, aiming to protect data and assets in an increasingly interconnected world.
Key similarities and differences
Both CDW and Zscaler operate within the technology sector, focusing on IT solutions; however, their business models diverge significantly. CDW offers a broad array of hardware and managed services, while Zscaler specializes in cloud security solutions. Additionally, CDW serves a wide range of industries, whereas Zscaler targets specific sectors needing enhanced security measures, particularly in the cloud environment.
Income Statement Comparison
In this section, I present a comparative analysis of the most recent income statements of CDW Corporation and Zscaler, Inc., focusing on key financial metrics that reflect their operational performance.
| Metric | CDW Corporation | Zscaler, Inc. |
|---|---|---|
| Market Cap | 18.78B | 39.12B |
| Revenue | 20.99B | 2.67B |
| EBITDA | 1.93B | 112M |
| EBIT | 1.65B | -8.77M |
| Net Income | 1.08B | -41.48M |
| EPS | 8.06 | -0.27 |
| Fiscal Year | 2024 | 2025 |
Interpretation of Income Statement
CDW Corporation’s revenue has shown relative stability, with a slight decline from the previous year, while Zscaler’s revenue has increased significantly compared to its previous fiscal year. However, Zscaler is currently facing negative net income, reflecting ongoing investments that have not yet translated into profitability. CDW maintains stronger margins, with a healthy EBITDA and net income, showcasing its operational efficiency. The recent performance indicates a cautious outlook for Zscaler, as it navigates through its growth phase amidst fluctuating costs and operational challenges.
Financial Ratios Comparison
In this section, I present a comparative overview of the financial ratios for CDW Corporation and Zscaler, Inc. for the most recent fiscal year.
| Metric | CDW | Zscaler |
|---|---|---|
| ROE | 45.81% | -2.31% |
| ROIC | 13.13% | -7.11% |
| P/E | 21.61 | -1063.01 |
| P/B | 9.90 | 24.51 |
| Current Ratio | 1.35 | 2.01 |
| Quick Ratio | 1.24 | 2.01 |
| D/E | 2.55 | 0.99 |
| Debt-to-Assets | 40.82% | 27.98% |
| Interest Coverage | 7.70 | -13.49 |
| Asset Turnover | 1.43 | 0.42 |
| Fixed Asset Turnover | 67.26 | 4.22 |
| Payout Ratio | 30.81% | 0% |
| Dividend Yield | 1.43% | 0% |
Interpretation of Financial Ratios
The ratios reveal that CDW exhibits strong financial health, particularly with a high ROE of 45.81% and a solid interest coverage ratio of 7.70, indicating good profitability and ability to meet interest obligations. Conversely, Zscaler shows negative returns and poor interest coverage, raising concerns over its operational viability and financial stability. These insights suggest that while CDW may be a safer investment, Zscaler presents significant risks that potential investors should carefully consider.
Dividend and Shareholder Returns
CDW Corporation (CDW) actively distributes dividends, boasting a payout ratio of 30.8% and a consistent annual dividend yield of 1.43%. The dividend per share has shown a positive trend, supported by a strong free cash flow coverage ratio of 2.81. Conversely, Zscaler, Inc. (ZS) does not pay dividends, focusing instead on reinvesting in growth and R&D. Although it engages in share buybacks, the absence of dividends reflects its strategy to prioritize long-term value creation. Overall, CDW’s dividends align with sustainable value, while Zscaler’s reinvestment approach could yield value in the future.
Strategic Positioning
CDW Corporation holds a significant share in the IT solutions market, particularly through its diverse offerings in hardware and integrated IT services. However, it faces competitive pressure from Zscaler, Inc., which specializes in cloud security solutions. Zscaler’s innovative approach and strong market presence in the cybersecurity space position it as a formidable competitor. Both companies must navigate the challenges posed by technological disruptions and evolving customer needs to maintain their market positions effectively.
Stock Comparison
In analyzing the stock price movements of CDW Corporation (CDW) and Zscaler, Inc. (ZS) over the past year, we can observe significant trading dynamics characterized by marked volatility and notable price variations.
Trend Analysis
For CDW Corporation, the percentage change over the past year is -32.62%, indicating a bearish trend. The highest price during this period reached 255.78, while the lowest was 140.2. The trend shows deceleration, with a standard deviation of 32.3, reflecting substantial volatility. In the recent period (from September 14, 2025, to November 30, 2025), the stock experienced a further decline of 12.22%, with a trend slope of -2.03 and a standard deviation of 8.71, indicating ongoing bearish momentum.
Conversely, Zscaler, Inc. has experienced a percentage change of 19.87% over the past year, signifying a bullish trend. The stock has seen a high of 331.14 and a low of 156.78. Although the trend is bullish, it is currently in a state of deceleration, with a standard deviation of 47.31 suggesting considerable volatility. In the recent analysis period, ZS faced a decline of 11.19%, with a trend slope of -1.15 and a standard deviation of 21.08, indicating a potential shift in momentum despite the overall positive annual performance.
Analyst Opinions
Recent analyst recommendations for CDW Corporation (CDW) indicate a consensus “Buy” rating, with an overall score of 3 and strong performance metrics in return on equity (5) and return on assets (4). Analysts appreciate CDW’s solid fundamentals, including a favorable debt-to-equity ratio (1). On the other hand, Zscaler, Inc. (ZS) has received a “Sell” rating, with an overall score of 1. Analysts, including those from leading investment firms, cite concerns over Zscaler’s weak return on equity and assets, urging caution for potential investors.
Stock Grades
As we analyze the latest stock grades from reputable grading companies, we can gain insights into investor sentiment and potential future performance.
CDW Corporation Grades
| Grading Company | Action | New Grade | Date |
|---|---|---|---|
| Raymond James | upgrade | Strong Buy | 2025-11-25 |
| Barclays | maintain | Equal Weight | 2025-11-05 |
| UBS | maintain | Buy | 2025-11-05 |
| Evercore ISI Group | maintain | Outperform | 2025-10-20 |
| UBS | maintain | Buy | 2025-08-07 |
| Barclays | maintain | Equal Weight | 2025-08-07 |
| JP Morgan | maintain | Neutral | 2025-07-17 |
| Citigroup | maintain | Neutral | 2025-07-11 |
| UBS | maintain | Buy | 2025-05-08 |
| Barclays | maintain | Equal Weight | 2025-05-08 |
Zscaler, Inc. Grades
| Grading Company | Action | New Grade | Date |
|---|---|---|---|
| Stifel | maintain | Buy | 2025-11-26 |
| Rosenblatt | maintain | Buy | 2025-11-26 |
| B of A Securities | maintain | Buy | 2025-11-26 |
| Scotiabank | maintain | Sector Outperform | 2025-11-26 |
| Mizuho | maintain | Neutral | 2025-11-26 |
| UBS | maintain | Buy | 2025-11-26 |
| Needham | maintain | Buy | 2025-11-26 |
| Baird | maintain | Outperform | 2025-11-26 |
| BTIG | maintain | Buy | 2025-11-26 |
| Bernstein | maintain | Outperform | 2025-11-26 |
Overall, CDW shows a strong upward trend with a notable upgrade to “Strong Buy,” while Zscaler maintains a consistent “Buy” rating across multiple firms. This reflects a generally optimistic outlook for both companies in their respective sectors.
Target Prices
Based on recent analyst consensus, here are the reliable target prices for CDW Corporation and Zscaler, Inc.
| Company | Target High | Target Low | Consensus |
|---|---|---|---|
| CDW Corporation | 190 | 148 | 174.33 |
| Zscaler, Inc. | 360 | 264 | 320.64 |
The analysts expect CDW Corporation’s stock to reach a consensus price of 174.33, while Zscaler, Inc.’s consensus stands at 320.64. Currently, CDW trades at 144.22, indicating potential upside, whereas Zscaler’s price of 250.92 suggests a more moderate outlook relative to its target.
Strengths and Weaknesses
The following table outlines the strengths and weaknesses of CDW Corporation and Zscaler, Inc., providing a quick reference for potential investors.
| Criterion | CDW Corporation | Zscaler, Inc. |
|---|---|---|
| Diversification | Strong across IT solutions | Focused on cloud security |
| Profitability | Net Profit Margin: 5.13% | Negative margins |
| Innovation | Steady product updates | High R&D investment |
| Global presence | Operates in US, UK, Canada | Global reach with cloud solutions |
| Market Share | Significant in IT services | Growing in cybersecurity sector |
| Debt level | Debt to Equity Ratio: 2.55 | Debt to Equity Ratio: 1.00 |
Key takeaways include CDW’s strong diversification and profitability metrics, contrasting with Zscaler’s innovation and global reach but facing challenges with profitability. Investors should weigh these factors carefully when considering their investments.
Risk Analysis
The following table outlines the key risks associated with CDW Corporation and Zscaler, Inc. as of the latest fiscal year.
| Metric | CDW Corporation | Zscaler, Inc. |
|---|---|---|
| Market Risk | Moderate | High |
| Regulatory Risk | Low | Moderate |
| Operational Risk | Moderate | High |
| Environmental Risk | Low | Low |
| Geopolitical Risk | Low | Moderate |
In summary, Zscaler faces significant operational and market risks due to its volatile earnings and high dependency on a growing but competitive cloud security market. Conversely, CDW, while not without risks, holds a more stable position with lower regulatory and operational challenges.
Which one to choose?
When comparing CDW Corporation (CDW) and Zscaler, Inc. (ZS), the fundamentals suggest a significant divergence in performance and stability. CDW has demonstrated consistent revenue growth, with a market cap of approximately $23B and a solid net profit margin of 5.1%. In contrast, Zscaler, with a market cap around $44B, has faced challenges with negative net income and a low profitability outlook, reflected in its C- rating. Analyst opinions favor CDW, which holds a B+ rating, while Zscaler lags behind.
Investors focused on growth may prefer CDW due to its more favorable financial metrics and stable profitability, while those willing to take on higher risk for potential future gains might consider Zscaler’s rapid growth potential. However, investors should be cautious of Zscaler’s competitive landscape and ongoing losses.
Disclaimer: This article is not financial advice. Each investor is responsible for their own investment decisions.
Go further
I encourage you to read the complete analyses of CDW Corporation and Zscaler, Inc. to enhance your investment decisions:
