Ambarella (NASDAQ: AMBA) and Photronics (NASDAQ:PLAB) are both small-cap computer and technology companies, but which is the superior investment? We will contrast the two businesses based on the strength of their institutional ownership, earnings, dividends, profitability, risk, valuation and analyst recommendations.

Analyst Recommendations

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This is a breakdown of current recommendations for Ambarella and Photronics, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Ambarella 0 4 7 0 2.64
Photronics 0 0 1 0 3.00

Ambarella presently has a consensus price target of $60.75, suggesting a potential upside of 17.82%. Photronics has a consensus price target of $13.00, suggesting a potential upside of 58.15%. Given Photronics’ stronger consensus rating and higher possible upside, analysts plainly believe Photronics is more favorable than Ambarella.

Risk and Volatility

Ambarella has a beta of 1.23, indicating that its share price is 23% more volatile than the S&P 500. Comparatively, Photronics has a beta of 0.53, indicating that its share price is 47% less volatile than the S&P 500.

Profitability

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

Net Margins Return on Equity Return on Assets
Ambarella 6.38% 4.04% 3.55%
Photronics 3.68% 1.96% 1.66%

Valuation & Earnings

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

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Ambarella $295.40 million 5.81 $18.85 million $0.55 93.75
Photronics $450.68 million 1.27 $13.13 million $0.19 43.26

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

Insider & Institutional Ownership

69.9% of Ambarella shares are held by institutional investors. Comparatively, 97.9% of Photronics shares are held by institutional investors. 5.8% of Ambarella shares are held by company insiders. Comparatively, 3.7% of Photronics shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Summary

Ambarella beats Photronics on 10 of the 14 factors compared between the two stocks.

Ambarella Company Profile

Ambarella, Inc. develops semiconductor processing solutions for video that enable high-definition (HD) video capture, sharing, and display worldwide. The company's system-on-a-chip designs integrated HD video processing, image processing, audio processing, and system functions onto a single chip for delivering video and image quality, differentiated functionality, and low power consumption. Its solutions enable the creation of video content for wearable sports cameras, automotive aftermarket cameras, and professional and consumer Internet Protocol (IP) security cameras, as well as cameras incorporated into unmanned aerial vehicles in the camera market; and manage IP video traffic, broadcast encoding and transcoding, and IP video delivery applications in the infrastructure market. The company sells its solutions to original design manufacturers and original equipment manufacturers through its direct sales force and logistics providers. Ambarella, Inc. was founded in 2004 and is headquartered in Santa Clara, California.

Photronics Company Profile

Photronics, Inc. is a manufacturer of photomasks, which are photographic quartz plates containing microscopic images of electronic circuits. As of October 30, 2016, the Company operated principally from nine manufacturing facilities: two located in Europe, three in Taiwan, one in Korea and three in the United States. Photomasks are used in the manufacture of semiconductors and flat panel displays (FPDs), and are used as masters to transfer circuit patterns onto semiconductor wafers and flat panel substrates during the fabrication of integrated circuits (ICs), and a range of FPDs and other types of electrical and optical components. The Company offers reticle and photomask maintenance, including pellicle replacement, mask cleaning and re-certification, at all its sites across the world. Its products include Mature Binary, Advanced Binary Reticles, Phase Shift Masks-Embedded Attenuated Phase Shift Masks (EAPSM), Other Advanced Products and Large Area Masks.

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