Critical Survey: Sparton Corporation (SPA) and Ambarella (AMBA)

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

Institutional and Insider Ownership

67.9% of Sparton Corporation shares are owned by institutional investors. Comparatively, 57.1% of Ambarella shares are owned by institutional investors. 5.0% of Sparton Corporation shares are owned by company insiders. Comparatively, 5.8% of Ambarella shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Analyst Recommendations

This is a summary of current ratings for Sparton Corporation and Ambarella, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Sparton Corporation 0 1 0 0 2.00
Ambarella 0 5 7 0 2.58

Sparton Corporation presently has a consensus target price of $20.00, suggesting a potential downside of 13.94%. Ambarella has a consensus target price of $57.80, suggesting a potential upside of 12.32%. Given Ambarella’s stronger consensus rating and higher possible upside, analysts clearly believe Ambarella is more favorable than Sparton Corporation.

Valuation & Earnings

This table compares Sparton Corporation and Ambarella’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Sparton Corporation $397.56 million 0.57 $22.01 million $0.13 178.77
Ambarella $323.76 million 5.28 $59.32 million $1.54 33.42

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

Profitability

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

Net Margins Return on Equity Return on Assets
Sparton Corporation 0.33% 11.18% 3.95%
Ambarella 16.45% 11.94% 10.55%

Volatility and Risk

Sparton Corporation has a beta of 1.28, meaning that its share price is 28% more volatile than the S&P 500. Comparatively, Ambarella has a beta of 1.57, meaning that its share price is 57% more volatile than the S&P 500.

Summary

Ambarella beats Sparton Corporation on 12 of the 14 factors compared between the two stocks.

Sparton Corporation Company Profile

Sparton Corporation is a provider of design, development and manufacturing services for electromechanical devices, as well as engineered products complementary to the same electromechanical value stream. The Company operates through two segments: Manufacturing & Design Services (MDS) and Engineered Components & Products (ECP). The Company serves the medical and biotechnology, military and aerospace, and industrial and commercial markets. Its products and services include offerings for original equipment manufacturers (OEM) and emerging technology (ET) customers, which utilize microprocessor-based systems, such as transducers, printed circuit boards and assemblies, and sensors, as well as development and design engineering services. It develops and manufactures sonobuoys, which are anti-submarine warfare (ASW) devices. The Company also manufactures rugged flat panel display systems for military panel personal computer workstations, air traffic control and industrial applications.

Ambarella Company Profile

Ambarella, Inc. offers semiconductor processing solutions for video that enable high-definition (HD), video capture, sharing and display. The Company operates through the development and sale of low-power, high-definition video products segment. Its system-on-a-chip designs incorporate HD video processing, image processing, audio processing and system functions onto a single chip. In the camera market, its platform enables the creation of video content in wearable cameras, automotive aftermarket cameras, professional and consumer Internet Protocol (IP), security cameras, telepresence cameras and unmanned aerial vehicles. In the infrastructure market, its solutions manage IP video traffic, broadcast encoding and transcoding, and IP video delivery applications. AmbaClear is its image signal processing architecture. AmbaCast is its HD video processing architecture. It offers the MotorVu 3D 360 degrees Surround View reference design for automotive original equipment manufacturer market.

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