Critical Contrast: FormFactor (NASDAQ:FORM) & Ambarella (NASDAQ:AMBA)

FormFactor (NASDAQ:FORM) and Ambarella (NASDAQ:AMBA) are both mid-cap computer and technology companies, but which is the better stock? We will compare the two companies based on the strength of their institutional ownership, risk, valuation, dividends, analyst recommendations, earnings and profitability.

Earnings and Valuation

This table compares FormFactor and Ambarella’s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
FormFactor	$663.10 million	5.32	$82.39 million	$1.06	42.92
Ambarella	$226.47 million	9.10	-$169.42 million	($4.24)	-12.08

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

Institutional & Insider Ownership

98.8% of FormFactor shares are held by institutional investors. Comparatively, 82.1% of Ambarella shares are held by institutional investors. 1.0% of FormFactor shares are held by insiders. Comparatively, 5.9% of Ambarella shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock will outperform the market over the long term.

Analyst Recommendations

This is a breakdown of recent ratings for FormFactor and Ambarella, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
FormFactor	0	4	3	0	2.43
Ambarella	0	4	8	0	2.67

FormFactor currently has a consensus target price of $40.67, indicating a potential downside of 10.45%. Ambarella has a consensus target price of $73.54, indicating a potential upside of 42.82%. Given Ambarella’s stronger consensus rating and higher possible upside, analysts plainly believe Ambarella is more favorable than FormFactor.

Volatility & Risk

FormFactor has a beta of 1.18, suggesting that its stock price is 18% more volatile than the S&P 500. Comparatively, Ambarella has a beta of 1.68, suggesting that its stock price is 68% more volatile than the S&P 500.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
FormFactor	12.42%	2.43%	1.98%
Ambarella	-74.81%	-23.38%	-20.18%

Summary

FormFactor beats Ambarella on 7 of the 13 factors compared between the two stocks.

About FormFactor

FormFactor, Inc. designs, manufactures, and sells probe cards, analytical probes, probe stations, metrology systems, thermal systems, and cryogenic systems to semiconductor companies and scientific institutions in the United States, Taiwan, South Korea, China, Europe, Japan, Malaysia, Singapore, and internationally. It operates in two segments, Probe Cards and Systems. The company offers probe cards to test various semiconductor device types, including systems on a chip products, mobile application processors, microprocessors, microcontrollers, and graphic processors, as well as radio frequency, analog, mixed signal, image sensor, electro-optical, dynamic random access memory, NAND flash memory, and NOR flash memory devices, as well as computer processor devices; and analytical probes, which are used for a range of applications, including device characterization, electrical simulation model development, failure analysis, and prototype design debugging for universities, research institutions, semiconductor integrated device manufacturers, semiconductor foundries, and fabless semiconductor companies. It also provides probe systems for semiconductor design engineers to capture and analyze accurate data; surface metrology systems for the development, production, and quality control of semiconductor products; thermal subsystems, such as thermal chucks and other test systems used in probe stations and other applications; and precision cryogenic instruments, semiconductor tests, and measurement systems. In addition, the company offers on-site probe card maintenance and service training, seminars, and telephone support services. It markets and sells its products through direct sales force, manufacturers' representatives, and distributors. The company was incorporated in 1993 and is headquartered in Livermore, California.

About Ambarella

Ambarella, Inc. develops semiconductor solutions that enable high-definition (HD) and ultra HD compression, image processing, and deep neural network processing worldwide. The company's system-on-a-chip designs integrated HD video processing, image processing, artificial intelligence computer vision algorithms, audio processing, and system functions onto a single chip for delivering video and image quality, differentiated functionality, and low power consumption. Its solutions are used in automotive cameras, such as automotive video recorders, electronic mirrors, front advanced driver assistance system camera, cabin monitoring system and driver monitoring system camera, and central domain controllers for autonomous vehicle; enterprise and home security camera; and robotics and industrial application, including identification/authentication cameras, robotic products, and sensing cameras, as well as cameras for the home, public spaces, and consumer leisure comprising wearable body cameras, sports action cameras, social media cameras, drones for capturing aerial video or photographs, video conferencing, and virtual reality applications. The company sells its solutions to original design manufacturers and original equipment manufacturers through its direct sales force and distributors. Ambarella, Inc. was incorporated in 2004 and is headquartered in Santa Clara, California.