Cavium (NASDAQ: CAVM) and United Microelectronics (NYSE:UMC) are both mid-cap technology companies, but which is the superior investment? We will contrast the two businesses based on the strength of their earnings, institutional ownership, risk, analyst recommendations, profitability, valuation and dividends.

Institutional & Insider Ownership

5.8% of United Microelectronics shares are owned by institutional investors. 4.7% of Cavium shares are owned by insiders. Comparatively, 8.0% of United Microelectronics 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 Cavium and United Microelectronics, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Cavium 0 9 9 0 2.50
United Microelectronics 8 0 0 0 1.00

Cavium currently has a consensus price target of $78.56, suggesting a potential downside of 9.91%. United Microelectronics has a consensus price target of $2.10, suggesting a potential downside of 14.63%. Given Cavium’s stronger consensus rating and higher possible upside, equities research analysts plainly believe Cavium is more favorable than United Microelectronics.

Earnings & Valuation

This table compares Cavium and United Microelectronics’ gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Cavium $603.31 million 10.00 -$147.20 million ($2.81) -31.03
United Microelectronics $4.59 billion 1.31 $266.08 million $0.14 17.57

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

Volatility & Risk

Cavium has a beta of 1.35, suggesting that its stock price is 35% more volatile than the S&P 500. Comparatively, United Microelectronics has a beta of 0.55, suggesting that its stock price is 45% less volatile than the S&P 500.

Profitability

This table compares Cavium and United Microelectronics’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Cavium -19.94% 11.16% 5.23%
United Microelectronics 6.90% 4.84% 2.71%

Dividends

United Microelectronics pays an annual dividend of $0.06 per share and has a dividend yield of 2.4%. Cavium does not pay a dividend. United Microelectronics pays out 42.9% of its earnings in the form of a dividend. United Microelectronics has raised its dividend for 2 consecutive years.

Summary

United Microelectronics beats Cavium on 9 of the 17 factors compared between the two stocks.

About Cavium

Cavium, Inc. is a provider of integrated semiconductor processors that enable intelligent processing for wired and wireless infrastructure and cloud for networking, communications, storage and security applications. The Company’s products consist of multi-core processors for embedded and data center applications, network connectivity for server and switches, storage connectivity, and security processors for offload and appliance. A range of its products also include a suite of embedded security protocols that enable unified threat management (UTM), secure connectivity, network perimeter protection and deep packet inspection (DPI). The Company sells its products to networking original equipment manufacturers (OEM), which sell into the enterprise, datacenter, service provider, and broadband and consumer markets. In the enterprise market, its products are used in routers, switches, storage appliances, server connectivity for networking and storage, wireless local area networks and UTM.

About United Microelectronics

United Microelectronics Corporation is a global semiconductor foundry. The Company provides integrated circuit (IC) production for applications spanning every sector of the electronics industry. The Company operates through two segments: wafer fabrication and new business. The primary operating activity of the Company’s wafer fabrication segment is the manufacture of chips to the design specifications of its customers by using its own processes and techniques. The new business segment primarily includes researching, developing, manufacturing, and providing solar energy and new generation light-emitting diode (LED). The Company maintains a customer base across various industries, including communication, consumer electronics, computer, memory and others, while focusing on manufacturing for applications, including networking, telecommunications, Internet, multimedia, personal computers (PCs) and graphics.

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