Comparing Applied Optoelectronics (NASDAQ:AAOI) and Rambus (NASDAQ:RMBS)

Rambus (NASDAQ:RMBS) and Applied Optoelectronics (NASDAQ:AAOI) are both small-cap computer and technology companies, but which is the superior business? We will compare the two businesses based on the strength of their analyst recommendations, dividends, risk, institutional ownership, profitability, valuation and earnings.

Profitability

This table compares Rambus and Applied Optoelectronics’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Rambus -35.34% 2.52% 1.89%
Applied Optoelectronics -16.22% -6.14% -4.12%

Risk and Volatility

Rambus has a beta of 0.68, meaning that its share price is 32% less volatile than the S&P 500. Comparatively, Applied Optoelectronics has a beta of 2.08, meaning that its share price is 108% more volatile than the S&P 500.

Valuation & Earnings

This table compares Rambus and Applied Optoelectronics’ revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Rambus $401.10 million 3.68 -$157.96 million $0.76 17.50
Applied Optoelectronics $267.46 million 0.78 -$2.15 million $0.53 19.61

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

Institutional and Insider Ownership

78.8% of Rambus shares are owned by institutional investors. Comparatively, 64.5% of Applied Optoelectronics shares are owned by institutional investors. 1.0% of Rambus shares are owned by insiders. Comparatively, 6.9% of Applied Optoelectronics shares are owned by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Analyst Recommendations

This is a breakdown of current recommendations and price targets for Rambus and Applied Optoelectronics, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Rambus 0 0 4 0 3.00
Applied Optoelectronics 2 7 1 0 1.90

Rambus currently has a consensus price target of $14.50, indicating a potential upside of 9.02%. Applied Optoelectronics has a consensus price target of $13.69, indicating a potential upside of 31.67%. Given Applied Optoelectronics’ higher possible upside, analysts clearly believe Applied Optoelectronics is more favorable than Rambus.

Summary

Rambus beats Applied Optoelectronics on 8 of the 14 factors compared between the two stocks.

About Rambus

Rambus Inc. provides semiconductor products in the United States, Japan, Europe, Taiwan, China, South Korea, Canada, Singapore, Asia, and internationally. The company operates through three divisions: Memory and Interfaces, Rambus Security, and Emerging Solutions. The Memory and Interfaces division engages in the design, development, and manufacturing through partnerships and licensing of technology and solutions related to memory and interfaces. It offers standards-compatible memory and SerDes solutions, including server DIMM memory interface chips, architectures, and IP cores for high-speed memory and SerDes interfaces. The Rambus Security division is involved in the design, development, deployment, and licensing of technologies for chip, system and in-field application security, anti-counterfeiting, smart ticketing, and mobile payments. It provides a suite of products and services from DPA countermeasures and cores to CryptoManager platform, mobile payments, and smart ticketing. The Emerging Solutions division engages in the research and development in the area of emerging technologies. The company also offers technology licenses to support the implementation and adoption of technology in their products or services; and a range of services, which include know-how and technology transfer, product design and development, system integration, and other services. Rambus Inc. was founded in 1990 and is headquartered in Sunnyvale, California.

About Applied Optoelectronics

Applied Optoelectronics, Inc. designs, manufactures, and sells various fiber-optic networking products worldwide. It offers optical modules, lasers, transmitters and transceivers, and turn-key equipment, as well as headend, node, and distribution equipment. The company sells its products to Internet data center operators, cable television and telecommunications equipment manufacturers, and Internet service providers through its direct and indirect sales channels. Applied Optoelectronics, Inc. was founded in 1997 and is headquartered in Sugar Land, Texas.

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