Deswell Industries (NASDAQ:DSWL) & CTS (NYSE:CTS) Critical Analysis

CTS (NYSE:CTS) and Deswell Industries (NASDAQ:DSWL) are both small-cap computer and technology companies, but which is the superior stock? We will compare the two businesses based on the strength of their earnings, risk, valuation, profitability, dividends, analyst recommendations and institutional ownership.

Dividends

CTS pays an annual dividend of $0.16 per share and has a dividend yield of 0.3%. Deswell Industries pays an annual dividend of $0.20 per share and has a dividend yield of 6.2%. CTS pays out 7.3% of its earnings in the form of a dividend. Deswell Industries pays out 41.7% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years.

Risk and Volatility

CTS has a beta of 0.88, indicating that its share price is 12% less volatile than the S&P 500. Comparatively, Deswell Industries has a beta of 0.54, indicating that its share price is 46% less volatile than the S&P 500.

Profitability

This table compares CTS and Deswell Industries’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
CTS	12.07%	12.14%	8.56%
Deswell Industries	N/A	N/A	N/A

Analyst Recommendations

This is a breakdown of recent recommendations and price targets for CTS and Deswell Industries, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
CTS	0	1	0	0	2.00
Deswell Industries	0	0	1	0	3.00

Earnings & Valuation

This table compares CTS and Deswell Industries”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
CTS	$541.32 million	2.45	$65.32 million	$2.19	21.07
Deswell Industries	$67.61 million	0.77	$11.14 million	$0.48	6.77

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

Institutional and Insider Ownership

96.9% of CTS shares are owned by institutional investors. 1.6% of CTS shares are owned by insiders. Comparatively, 39.0% of Deswell Industries shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.

Summary

CTS beats Deswell Industries on 11 of the 15 factors compared between the two stocks.

About CTS

CTS Corporation manufactures and sells sensors, actuators, and connectivity components in North America, Europe, and Asia. The company provides encoders, rotary position sensors, slide potentiometers, industrial and commercial rotary potentiometers. It also provides non-contacting, and contacting pedals; and eBrake pedals. In addition, the company offers flow meters, hydrophones, non-destructive testing, sonar, ultrasonic imaging, piezoelectric materials, piezoelectric sense products, and bulk products. Further, it provides eMobility, chassis, current sensors, clutch, brake, position sensors, stroke sensor, seating, speed, throttle, transmission, turbo, temperature sensors, and technical related products. Additionally, the company offers DIP, rotary selector, tactile, rotary DIP, and toggle switches, as well as provides transducer related products. Furthermore, it provides EMI, RFI, and RFI products; specialty and resistors; and frequency control products. The company sells and markets its products through its sales engineers, independent manufacturer representatives, and distributors. CTS Corporation was founded in 1896 and is based in Lisle, Illinois.

About Deswell Industries

Deswell Industries, Inc. manufactures and sells injection-molded plastic parts and components, electronic products and subassemblies, and metallic molds and accessory parts for original equipment manufacturers and contract manufacturers in China, the United States, Europe, Hong Kong, the United Kingdom, Canada, and internationally. It operates through two segments, Plastic Injection Molding and Electronic Products Assembling. The company produces a range of plastic parts and components that are used in the manufacture of consumer and industrial products, which include plastic components for electronic entertainment products, power tools, accessories, and outdoor equipment; cases for flashlights, telephones, printers, scanners; parts for industrial components, and indoor control switches, as well as parts for audio equipment, and cases and key tops for personal organizers and remote controls; double injection caps; parts for medical products comprising apparatus for blood tests; laser key caps; automobile components; and plastic components of automatic robot. It also provides electronic products that consist of audio equipment, including digital and analogue audio mixers, amplifiers, signal processors, audio interfaces, network audio equipment, and speaker enclosures; consumer audio products, such as multi-channel receivers-amplifiers, wired and wireless audio streaming products, and headphones; printed circuit board assemblies; and medical products. The company was founded in 1987 and is based in Macau.