Critical Comparison: NetScout Systems (NASDAQ:NTCT) & Applied Optoelectronics (NASDAQ:AAOI)

NetScout Systems (NASDAQ:NTCT) and Applied Optoelectronics (NASDAQ:AAOI) are both mid-cap technology companies, but which is the better investment? We will compare the two businesses based on the strength of their risk, dividends, valuation, analyst recommendations, institutional ownership, profitability and earnings.

Institutional and Insider Ownership

91.6% of NetScout Systems shares are held by institutional investors. Comparatively, 61.7% of Applied Optoelectronics shares are held by institutional investors. 4.7% of NetScout Systems shares are held by insiders. Comparatively, 3.8% of Applied Optoelectronics shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock is poised for long-term growth.

Analyst Ratings

This is a breakdown of current recommendations for NetScout Systems and Applied Optoelectronics, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
NetScout Systems	0	2	0	1	2.67
Applied Optoelectronics	1	2	3	0	2.33

NetScout Systems presently has a consensus target price of $38.00, indicating a potential downside of 3.92%. Applied Optoelectronics has a consensus target price of $139.40, indicating a potential upside of 41.11%. Given Applied Optoelectronics’ higher probable upside, analysts plainly believe Applied Optoelectronics is more favorable than NetScout Systems.

Risk & Volatility

NetScout Systems has a beta of 0.69, meaning that its share price is 31% less volatile than the S&P 500. Comparatively, Applied Optoelectronics has a beta of 3.79, meaning that its share price is 279% more volatile than the S&P 500.

Valuation & Earnings

This table compares NetScout Systems and Applied Optoelectronics”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
NetScout Systems	$883.16 million	3.26	$95.53 million	$1.64	24.12
Applied Optoelectronics	$455.71 million	18.33	-$38.23 million	($0.78)	-126.65

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

Profitability

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

	Net Margins	Return on Equity	Return on Assets
NetScout Systems	13.71%	9.25%	6.59%
Applied Optoelectronics	-9.57%	-1.98%	-1.34%

Summary

NetScout Systems beats Applied Optoelectronics on 11 of the 15 factors compared between the two stocks.

About NetScout Systems

NetScout Systems, Inc. provides service assurance and cybersecurity solutions for protect digital business services against disruptions in the United States, Europe, Asia, and internationally. The company offers nGeniusONE management software that enables customers to predict, preempt, and resolve network and service delivery problems, as well as facilitate the optimization and capacity planning of their network infrastructures; and specialized platforms and analytic modules that enable its customers to analyze and troubleshoot traffic in radio access and Wi-Fi networks. It also provides nGeniusPULSE, an active testing tool that enables enterprises to identify infrastructure performance issues and determine application availability, reliability, and performance; and nGenius Business Analytics solution, which enables service providers to analyze their network traffic. In addition, the company offers ISNG, an advanced passive network probe; packet flow systems that deliver targeted network traffic access to various monitoring and security tools and systems; and a suite of test access points that enable non-disruptive access to network traffic. Further, it provides cybersecurity solutions to protect their networks against distributed denial of service attacks under the Arbor brand, such as Arbor Sightline, Arbor Threat Mitigation System, Arbor Insight, Arbor Edge Defense, and Arbor Cloud. Additionally, the company offers advanced threat detection solutions, such as Omnis Cyber Investigator. It serves enterprise customers in various industries, including financial services, technology, manufacturing, healthcare, utilities, education, transportation, and retail; mobile operators, wireline operators, cable operators, Internet service providers, and cloud providers; and governmental agencies through a direct sales force, and indirect reseller and distribution channels. The company was incorporated in 1984 and is headquartered in Westford, Massachusetts.

About Applied Optoelectronics

Applied Optoelectronics, Inc. designs, manufactures, and sells fiber-optic networking products in the United States, Taiwan, and China. It offers optical modules, optical filters, lasers, laser components, subassemblies, transmitters and transceivers, turn-key equipment, headend, node, distribution equipment, and amplifiers. The company sells its products to internet data center operators, cable television, telecom equipment manufacturers, fiber-to-the-home, and internet service providers through its direct and indirect sales channels. Applied Optoelectronics, Inc. was incorporated in 1997 and is headquartered in Sugar Land, Texas.