Both Xcerra Corporation (NASDAQ:$XCRA) and Lam Research Corporation (NASDAQ:$LRCX) are small-cap companies that specialize in computers and technology. So which one is the better investment? Let’s look at the numbers.
What are Analysts Saying?
Currently, Xcerra is at 5 ‘Hold’ ratings. This gives it an exact rating score of 2.00. Lam Research, on the other hand, has 17 ‘Buy’ ratings and 3 ‘Hold’ ratings, giving them a rating score of 2.85.
Meanwhile, Xcerra has a target price of $10.25 which indicates a potential upside of 4.38%, whereas Lam has a consensus target price of $179.00, giving them a potential downside of 3.75%.
Despite having an overall higher average rating score than Xcerra, Lam’s potential downside indicates that analysts believe Xcerra to be the better investment.
Profitability
Xcerra has a Return on Equity of 9.08%, a Return on Assets of 6.7%, and a Net Margin of 5.77%. Lam, on the other hand, has a Return on Equity of 26.78%, a Return on Assets of 14.96%, and a Net Margin of 21.19%, making it the more profitable company.
Earnings & Valuation
Xcerra has a Gross Revenue of $390.77 million with an EBITDA of $34.79 million. They also have a Price/Sales Ratio of 1.37, a Price/Earnings Ratio of 23.38 and Earnings Per Share of $0.42. Lam, on the other hand, has Gross Revenue of $8.01 billion, an EBITDA of $2.22 billion, Price/Sales Ratio of 3.77, Price/Earnings Ratio of 20.21 and Earnings Per Share of $9.20.
Given these numbers, it’s clear that, despite Xcerra’s higher revenue, Lam Research is trading at a lower price-to-earnings ratio that makes it a more affordable stock.
Dividends
No dividends are paid out by Xcerra, whereas Lam pays out an annualized dividend of $1.80 per share and a dividend yield of 1.0%. As well, it pays out 19.6% of its earnings in the form of dividends.
Institutions & Insiders
Both institutional and insider ownership can indicate that those respective groups have faith in the direction of the company. Even more so for institutions, who rely on profits from their investments to continue operating. Xcerra currently has 86.1% institutional ownership, whereas Lam is currently 94.0% owned by institutions. Clearly, Lam has the higher institutional ownership.
As for insiders, however, Xcerra is currently 2.6% owned by insiders, while Lam is only 0.4%. Despite the fact that insiders are not as strong of indicators for a stock, they do still hold some weight as their vested interest in stock performance aligns them with your own.
What are the Risks?
Xcerra is currently 61% more volatile than the S&P 500, as indicated by its beta of 1.61. Lam, on the other hand, is 52% more volatile than the S&P 500, with its beta of 1.52. Despite both having betas that lean towards the volatile side, Lam is clearly the less risky investment.
The Bottom Line
Lam Research Corporation wins out over its competition in 11 of the 16 categories we looked at between these two stocks.
Featured Image: depositphotos/alexeynovikov
