Ambarella (NASDAQ: AMBA) and Arrow Electronics (NYSE:ARW) are both computer and technology companies, but which is the superior investment? We will contrast the two companies based on the strength of their dividends, earnings, valuation, institutional ownership, profitability, risk and analyst recommendations.

Risk and Volatility

Ambarella has a beta of 1.6, meaning that its share price is 60% more volatile than the S&P 500. Comparatively, Arrow Electronics has a beta of 1.12, meaning that its share price is 12% more volatile than the S&P 500.

Valuation & Earnings

This table compares Ambarella and Arrow Electronics’ revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Ambarella $323.76 million 4.71 $59.32 million $1.54 29.51
Arrow Electronics $24.60 billion 0.28 $1.09 billion $5.46 14.43

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

Profitability

This table compares Ambarella and Arrow Electronics’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Ambarella 16.45% 11.94% 10.55%
Arrow Electronics 2.01% 13.52% 4.49%

Institutional & Insider Ownership

56.7% of Ambarella shares are owned by institutional investors. Comparatively, 93.3% of Arrow Electronics shares are owned by institutional investors. 5.8% of Ambarella shares are owned by insiders. Comparatively, 1.2% of Arrow Electronics shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.

Analyst Recommendations

This is a summary of recent recommendations and price targets for Ambarella and Arrow Electronics, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Ambarella 0 5 7 0 2.58
Arrow Electronics 0 3 2 0 2.40

Ambarella currently has a consensus price target of $57.80, indicating a potential upside of 27.17%. Arrow Electronics has a consensus price target of $74.80, indicating a potential downside of 5.06%. Given Ambarella’s stronger consensus rating and higher possible upside, equities research analysts plainly believe Ambarella is more favorable than Arrow Electronics.

Summary

Ambarella beats Arrow Electronics on 9 of the 14 factors compared between the two stocks.

Ambarella Company Profile

Ambarella, Inc. offers semiconductor processing solutions for video that enable high-definition (HD), video capture, sharing and display. The Company operates through the development and sale of low-power, high-definition video products segment. Its system-on-a-chip designs incorporate HD video processing, image processing, audio processing and system functions onto a single chip. In the camera market, its platform enables the creation of video content in wearable cameras, automotive aftermarket cameras, professional and consumer Internet Protocol (IP), security cameras, telepresence cameras and unmanned aerial vehicles. In the infrastructure market, its solutions manage IP video traffic, broadcast encoding and transcoding, and IP video delivery applications. AmbaClear is its image signal processing architecture. AmbaCast is its HD video processing architecture. It offers the MotorVu 3D 360 degrees Surround View reference design for automotive original equipment manufacturer market.

Arrow Electronics Company Profile

Arrow Electronics, Inc. is a provider of products, services and solutions to industrial and commercial users of electronic components and enterprise computing solutions. The Company has a portfolio of product offerings available from various electronic components and enterprise computing solutions suppliers. The Company’s segments include the global components business; the global enterprise computing solutions (ECS) business, and corporate business segment. It distributes electronic components to original equipment manufacturers and contract manufacturers through its global components business segment. Through global ECS business segment, it provides enterprise computing solutions to value-added resellers. The Global components segment markets and distributes electronic components and provides a range of value-added capabilities. Global ECS’ portfolio of computing solutions includes datacenter, cloud, security, and analytics solutions.

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