Financial Review: Broadcom (NASDAQ:AVGO) versus Applied Optoelectronics (NASDAQ:AAOI)

Broadcom (NASDAQ:AVGO) and Applied Optoelectronics (NASDAQ:AAOI) are both computer and technology companies, but which is the superior business? We will contrast the two companies based on the strength of their dividends, valuation, analyst recommendations, risk, profitability, institutional ownership and earnings.

Insider & Institutional Ownership

76.4% of Broadcom shares are held by institutional investors. Comparatively, 61.7% of Applied Optoelectronics shares are held by institutional investors. 2.0% of Broadcom shares are held by insiders. Comparatively, 5.4% of Applied Optoelectronics shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Analyst Ratings

This is a summary of recent recommendations and price targets for Broadcom and Applied Optoelectronics, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Broadcom	0	2	24	0	2.92
Applied Optoelectronics	1	1	3	0	2.40

Broadcom currently has a consensus price target of $225.04, indicating a potential downside of 1.53%. Applied Optoelectronics has a consensus price target of $29.20, indicating a potential upside of 10.48%. Given Applied Optoelectronics’ higher possible upside, analysts clearly believe Applied Optoelectronics is more favorable than Broadcom.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Broadcom	11.43%	28.00%	11.16%
Applied Optoelectronics	-38.61%	-22.36%	-12.08%

Risk and Volatility

Broadcom has a beta of 1.02, meaning that its share price is 2% more volatile than the S&P 500. Comparatively, Applied Optoelectronics has a beta of 2.36, meaning that its share price is 136% more volatile than the S&P 500.

Earnings and Valuation

This table compares Broadcom and Applied Optoelectronics”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Broadcom	$51.57 billion	20.77	$5.90 billion	$1.23	186.40
Applied Optoelectronics	$209.55 million	5.91	-$56.05 million	($2.06)	-12.83

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

Summary

Broadcom beats Applied Optoelectronics on 11 of the 14 factors compared between the two stocks.

About Broadcom

Broadcom Inc. designs, develops, and supplies various semiconductor devices with a focus on complex digital and mixed signal complementary metal oxide semiconductor based devices and analog III-V based products worldwide. The company operates in two segments, Semiconductor Solutions and Infrastructure Software. It provides set-top box system-on-chips (SoCs); cable, digital subscriber line, and passive optical networking central office/consumer premise equipment SoCs; wireless local area network access point SoCs; Ethernet switching and routing custom silicon solutions; serializer/deserializer application specific integrated circuits; optical and copper, and physical layer devices; and fiber optic components and RF semiconductor devices. The company also offers RF front end modules and filter; Wi-Fi, Bluetooth, and global positioning system/global navigation satellite system SoCs; custom touch controllers; inductive charging; attached small computer system interface, and redundant array of independent disks controllers and adapters; peripheral component interconnect express; fiber channel host bus adapters; read channel based SoCs; custom flash controllers; preamplifiers; optocouplers, industrial fiber optics, and motion control encoders and subsystems; light emitting diode, ethernet PHYs, switch ICs, and camera microcontrollers. Its products are used in various applications, including enterprise and data center networking, home connectivity, set-top boxes, broadband access, telecommunication equipment, smartphones and base stations, data center servers and storage systems, factory automation, power generation and alternative energy systems, and electronic displays. Broadcom Inc. was founded in 1961 and is headquartered in Palo Alto, California.

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.