Is Red Hat Inc (RHT) Destined for Greatness?

All these Silicon Valley marketing buzzwords can make the non-techie investor’s eyes cross, but Red Hat certainly seems set for robust growth in the future — at least if the consistent growth in net income during the last few quarters can continue. However, Red Hat has no time to rest on its laurels. Cloud computing, despite being one of the hot tech trends of the young decade, has yet to displace the server infrastructure most large companies still depend on for both Web traffic and intranet purposes.

There are many players in the cloud game, but at this early stage, it’s possible that most of them will wind up falling by the wayside. Red Hat’s focus on open-source software could be the killer edge it needs to avoid obsolescence, but that alone is no guarantee — developers can implement virtually any software they want on Amazon.com‘s Elastic Compute Cloud and Rackspace Hosting, Inc. (NYSE:RAX) is every bit as committed to the “open cloud” as Red Hat. Of course, Red Hat currently brings nearly three times the annual free cash flow to the game as Rackspace Hosting, Inc. (NYSE:RAX), despite boasting a very similar P/E. Red Hat might not get the same attention as Rackspace Hosting, Inc. (NYSE:RAX), but it appears to be in a better position to take advantage of the open-source trend in cloud computing.

Putting the pieces together
Today, Red Hat has some of the qualities that make up a great stock, but no stock is truly perfect. Digging deeper can help you uncover the answers you need to make a great buy — or to stay away from a stock that’s going nowhere.

The article Is Red Hat Destined for Greatness? originally appeared on Fool.com and is written by Alex Planes.

Fool contributor Alex Planes has no position in any stocks mentioned. The Motley Fool recommends Rackspace Hosting (NYSE:RAX). It recommends and owns shares of Amazon.com.

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