Comparing ARM (NASDAQ:ARM) & Allegro MicroSystems (NASDAQ:ALGM)

ARM (NASDAQ:ARM) and Allegro MicroSystems (NASDAQ:ALGM) are both technology companies, but which is the superior business? We will compare the two companies based on the strength of their dividends, valuation, institutional ownership, analyst recommendations, earnings, risk and profitability.

Analyst Recommendations

This is a breakdown of current ratings and recommmendations for ARM and Allegro MicroSystems, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
ARM	1	7	18	0	2.65
Allegro MicroSystems	1	2	9	0	2.67

ARM presently has a consensus price target of $285.33, suggesting a potential upside of 0.98%. Allegro MicroSystems has a consensus price target of $52.80, suggesting a potential upside of 20.63%. Given Allegro MicroSystems’ stronger consensus rating and higher possible upside, analysts clearly believe Allegro MicroSystems is more favorable than ARM.

Insider & Institutional Ownership

7.5% of ARM shares are held by institutional investors. Comparatively, 56.5% of Allegro MicroSystems shares are held by institutional investors. 0.5% of Allegro MicroSystems shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.

Volatility & Risk

ARM has a beta of 3.9, suggesting that its stock price is 290% more volatile than the S&P 500. Comparatively, Allegro MicroSystems has a beta of 1.94, suggesting that its stock price is 94% more volatile than the S&P 500.

Valuation and Earnings

This table compares ARM and Allegro MicroSystems”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
ARM	$4.92 billion	61.34	$904.00 million	$0.97	291.31
Allegro MicroSystems	$890.10 million	9.17	-$14.90 million	$0.06	729.50

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

Profitability

This table compares ARM and Allegro MicroSystems’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
ARM	20.25%	12.24%	9.41%
Allegro MicroSystems	1.50%	8.30%	5.65%

Summary

ARM beats Allegro MicroSystems on 9 of the 14 factors compared between the two stocks.

About ARM

Arm Holdings Plc engages in the licensing, marketing, research, and development of microprocessors, systems IP, graphics processing units, physical IP and associated systems IP, software, and tools. It operates through the following geographical segments: United Kingdom, United States, and Other Countries. The company was founded on November 12, 1990 and is headquartered in Cambridge, the United Kingdom.

About Allegro MicroSystems

Allegro MicroSystems, Inc., together with its subsidiaries, designs, develops, manufactures, and markets sensor integrated circuits (ICs) and application-specific analog power ICs for motion control and energy-efficient systems. Its products include magnetic sensor ICs, such as position, speed, and current sensor ICs; and power ICs comprising motor driver ICs, regulator and LED driver ICs, and isolated gate drivers. The company sells its products to original equipment manufacturers and distributors primarily in the automotive and industrial markets through its direct sales force, third party distributors, independent sales representatives, and consignment. It operates in the United States, rest of the Americas, Europe, Japan, Greater China, South Korea, and other Asian markets. The company was founded in 1990 and is headquartered in Manchester, New Hampshire. Allegro MicroSystems, Inc. is a subsidiary of Sanken Electric Co., Ltd.