Financial Analysis: Silicom (NASDAQ:SILC) vs. Lumentum (NASDAQ:LITE)

Silicom (NASDAQ:SILC) and Lumentum (NASDAQ:LITE) are both technology companies, but which is the superior business? We will contrast the two businesses based on the strength of their profitability, valuation, analyst recommendations, earnings, institutional ownership, risk and dividends.

Earnings & Valuation

This table compares Silicom and Lumentum”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Silicom	$61.93 million	3.85	-$11.48 million	($1.71)	-24.28
Lumentum	$1.65 billion	39.64	$25.90 million	$5.40	155.20

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

Analyst Ratings

This is a breakdown of recent recommendations and price targets for Silicom and Lumentum, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Silicom	1	0	1	0	2.00
Lumentum	0	7	14	0	2.67

Silicom currently has a consensus target price of $60.00, indicating a potential upside of 44.51%. Lumentum has a consensus target price of $1,012.67, indicating a potential upside of 20.83%. Given Silicom’s higher probable upside, research analysts plainly believe Silicom is more favorable than Lumentum.

Risk & Volatility

Silicom has a beta of 1.55, suggesting that its stock price is 55% more volatile than the S&P 500. Comparatively, Lumentum has a beta of 1.5, suggesting that its stock price is 50% more volatile than the S&P 500.

Profitability

This table compares Silicom and Lumentum’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Silicom	-12.98%	-8.37%	-6.26%
Lumentum	17.61%	24.81%	6.89%

Institutional & Insider Ownership

52.8% of Silicom shares are held by institutional investors. Comparatively, 94.1% of Lumentum shares are held by institutional investors. 25.4% of Silicom shares are held by company insiders. Comparatively, 0.4% of Lumentum shares are held by company 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

Lumentum beats Silicom on 11 of the 14 factors compared between the two stocks.

About Silicom

Silicom Ltd., together with its subsidiaries, designs, manufactures, markets, and supports networking and data infrastructure solutions for servers, server-based systems, and communications devices. It offers server network interface cards; and smart cards, such as smart server adapters, which include redirector and switching cards, encryption and data compression hardware acceleration cards, forward error correction acceleration and offloading cards, time synchronization cards, and field programmable gate array-based cards. The company also provides virtualized and universal customer-premises equipment; and edge devices for SD-WAN, secure access service edge, Telco dedicated routers, and NFV deployments. It serves original equipment manufacturing, cloud, telco, mobile, and related service provider markets. The company operates in the United States, North America, Israel, Europe, and the Asia Pacific. Silicom Ltd. was incorporated in 1987 and is headquartered in Kfar Saba, Israel.

About Lumentum

Lumentum Holdings Inc. manufactures and sells optical and photonic products in the Americas, the Asia-Pacific, Europe, the Middle East, and Africa. The company operates through two segments: Optical Communications (OpComms) and Commercial Lasers (Lasers). The OpComms segment offers components, modules, and subsystems that enable the transmission and transport of video, audio, and data over high-capacity fiber optic cables. It offers tunable transponders, transceivers, and transmitter modules; tunable lasers, receivers, and modulators; transport products, such as reconfigurable optical add/drop multiplexers, amplifiers, and optical channel monitors, as well as components, including 980nm, multi-mode, and Raman pumps; and switches, attenuators, photodetectors, gain flattening filters, isolators, wavelength-division multiplexing filters, arrayed waveguide gratings, multiplex/de-multiplexers, and integrated passive modules. This segment also provides Super Transport Blade, which integrates optical transport functions into a single-slot blade; vertical-cavity surface-emitting lasers; directly modulated and electro-absorption modulated lasers; and laser illumination sources for 3D sensing systems. It serves customers in telecommunications, data communications, and consumer and industrial markets. The Commercial Lasers segment offers diode-pumped solid-state, fiber, diode, direct-diode, and gas lasers, such as argon-ion and helium-neon lasers for use in original equipment manufacturer applications. It serves customers in markets and applications, such as sheet metal processing, general manufacturing, biotechnology, solar cell processing, graphics and imaging, remote sensing, and precision machining. Lumentum Holdings Inc. was incorporated in 2015 and is headquartered in San Jose, California.