Reviewing Silicon Motion Technology (NASDAQ:SIMO) & Cavium (CAVM)

Cavium (NASDAQ: CAVM) and Silicon Motion Technology (NASDAQ:SIMO) are both technology companies, but which is the better business? We will compare the two businesses based on the strength of their earnings, profitability, dividends, analyst recommendations, risk, valuation and institutional ownership.

Valuation and Earnings

This table compares Cavium and Silicon Motion Technology’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio NetIncome Earnings Per Share Price/Earnings Ratio
Cavium $603.31 million 10.00 -$147.20 million ($2.81) -31.03
Silicon Motion Technology $556.15 million 3.12 $110.94 million $2.56 19.17

Silicon Motion Technology has higher revenue, but lower earnings than Cavium. Cavium is trading at a lower price-to-earnings ratio than Silicon Motion Technology, indicating that it is currently the more affordable of the two stocks.

Insider & Institutional Ownership

84.5% of Silicon Motion Technology shares are owned by institutional investors. 4.7% of Cavium shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Analyst Ratings

This is a breakdown of current ratings and recommmendations for Cavium and Silicon Motion Technology, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Cavium 0 10 8 0 2.44
Silicon Motion Technology 0 3 10 0 2.77

Cavium currently has a consensus target price of $81.00, indicating a potential downside of 7.11%. Silicon Motion Technology has a consensus target price of $57.67, indicating a potential upside of 17.52%. Given Silicon Motion Technology’s stronger consensus rating and higher possible upside, analysts clearly believe Silicon Motion Technology is more favorable than Cavium.

Dividends

Silicon Motion Technology pays an annual dividend of $0.89 per share and has a dividend yield of 1.8%. Cavium does not pay a dividend. Silicon Motion Technology pays out 34.8% of its earnings in the form of a dividend.

Profitability

This table compares Cavium and Silicon Motion Technology’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Cavium -19.94% 11.16% 5.23%
Silicon Motion Technology 13.83% 13.93% 10.94%

Risk and Volatility

Cavium has a beta of 1.27, meaning that its stock price is 27% more volatile than the S&P 500. Comparatively, Silicon Motion Technology has a beta of 0.65, meaning that its stock price is 35% less volatile than the S&P 500.

Summary

Silicon Motion Technology beats Cavium on 10 of the 16 factors compared between the two stocks.

Cavium Company Profile

Cavium, Inc. is a provider of integrated semiconductor processors that enable intelligent processing for wired and wireless infrastructure and cloud for networking, communications, storage and security applications. The Company’s products consist of multi-core processors for embedded and data center applications, network connectivity for server and switches, storage connectivity, and security processors for offload and appliance. A range of its products also include a suite of embedded security protocols that enable unified threat management (UTM), secure connectivity, network perimeter protection and deep packet inspection (DPI). The Company sells its products to networking original equipment manufacturers (OEM), which sell into the enterprise, datacenter, service provider, and broadband and consumer markets. In the enterprise market, its products are used in routers, switches, storage appliances, server connectivity for networking and storage, wireless local area networks and UTM.

Silicon Motion Technology Company Profile

Silicon Motion Technology Corporation is a fabless semiconductor company. The Company designs, develops and markets low-power semiconductor solutions to original equipment manufacturers (OEMs) and other customers in the mobile storage and mobile communications markets. It is engaged in developing negative-AND (NAND) flash controller integrated circuits (ICs) for solid-state storage devices and specialty radio frequency (RF) ICs for mobile devices. In the mobile storage market, the Company’s products are controllers used in embedded storage products, such as Solid State Drives (SSDs), and Embedded Multimedia Cards (eMMCs), as well as expandable storage products, such as flash memory cards and universal serial bus (USB) flash drives. For the mobile communications market, the Company’s products are handset transceivers and mobile television (TV) System on Chips (SoCs). The Company’s products are used in devices, such as smartphones, tablets and personal computers (PCs).

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