Financial Survey: ARM (NASDAQ:ARM) versus Applied Optoelectronics (NASDAQ:AAOI)

ARM (NASDAQ:ARM) and Applied Optoelectronics (NASDAQ:AAOI) are both computer and technology companies, but which is the better investment? We will compare the two companies based on the strength of their institutional ownership, analyst recommendations, valuation, profitability, risk, dividends and earnings.

Profitability

This table compares ARM and Applied Optoelectronics’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
ARM	21.82%	11.94%	8.62%
Applied Optoelectronics	-38.61%	-22.36%	-12.08%

Earnings & Valuation

This table compares ARM and Applied Optoelectronics”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
ARM	$3.69 billion	37.36	$306.00 million	$0.76	173.28
Applied Optoelectronics	$209.55 million	4.89	-$56.05 million	($2.06)	-10.61

ARM has higher revenue and earnings than Applied Optoelectronics. Applied Optoelectronics is trading at a lower price-to-earnings ratio than ARM, indicating that it is currently the more affordable of the two stocks.

Analyst Ratings

This is a summary of recent recommendations for ARM and Applied Optoelectronics, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
ARM	2	5	19	1	2.70
Applied Optoelectronics	1	1	3	0	2.40

ARM currently has a consensus target price of $165.23, suggesting a potential upside of 25.47%. Applied Optoelectronics has a consensus target price of $27.60, suggesting a potential upside of 26.26%. Given Applied Optoelectronics’ higher probable upside, analysts plainly believe Applied Optoelectronics is more favorable than ARM.

Insider and Institutional Ownership

7.5% of ARM shares are owned by institutional investors. Comparatively, 61.7% of Applied Optoelectronics shares are owned by institutional investors. 5.4% of Applied Optoelectronics shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Volatility & Risk

ARM has a beta of 4.56, indicating that its share price is 356% more volatile than the S&P 500. Comparatively, Applied Optoelectronics has a beta of 2.36, indicating that its share price is 136% more volatile than the S&P 500.

Summary

ARM beats Applied Optoelectronics on 12 of the 15 factors compared between the two stocks.

About ARM

Arm Holdings Plc engages in the licensing, marketing, research, and development of microprocessors, systems IP, graphics processing units, physical IP and associated systems IP, software, and tools. It operates through the following geographical segments: United Kingdom, United States, and Other Countries. The company was founded on November 12, 1990 and is headquartered in Cambridge, the United Kingdom.

About Applied Optoelectronics

Applied Optoelectronics, Inc. designs, manufactures, and sells fiber-optic networking products in the United States, Taiwan, and China. It offers optical modules, optical filters, lasers, laser components, subassemblies, transmitters and transceivers, turn-key equipment, headend, node, distribution equipment, and amplifiers. The company sells its products to internet data center operators, cable television, telecom equipment manufacturers, fiber-to-the-home, and internet service providers through its direct and indirect sales channels. Applied Optoelectronics, Inc. was incorporated in 1997 and is headquartered in Sugar Land, Texas.