Critical Review: Super Micro Computer (SMCI) and Switch (SWCH)

Super Micro Computer (NASDAQ: SMCI) and Switch (NYSE:SWCH) are both technology companies, but which is the better stock? We will compare the two companies based on the strength of their profitability, institutional ownership, valuation, earnings, dividends, analyst recommendations and risk.

Insider & Institutional Ownership

80.6% of Super Micro Computer shares are held by institutional investors. 23.6% of Super Micro Computer shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.

Profitability

This table compares Super Micro Computer and Switch’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Super Micro Computer 2.74% 9.08% 5.08%
Switch N/A N/A N/A

Earnings & Valuation

This table compares Super Micro Computer and Switch’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Super Micro Computer $2.53 billion 0.42 $69.32 million $1.34 16.12
Switch $318.35 million 13.84 $31.36 million $0.14 124.64

Super Micro Computer has higher revenue and earnings than Switch. Super Micro Computer is trading at a lower price-to-earnings ratio than Switch, indicating that it is currently the more affordable of the two stocks.

Analyst Ratings

This is a summary of current recommendations and price targets for Super Micro Computer and Switch, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Super Micro Computer 0 6 3 0 2.33
Switch 0 5 5 0 2.50

Super Micro Computer presently has a consensus price target of $28.71, suggesting a potential upside of 32.94%. Switch has a consensus price target of $22.20, suggesting a potential upside of 27.22%. Given Super Micro Computer’s higher probable upside, research analysts clearly believe Super Micro Computer is more favorable than Switch.

Summary

Super Micro Computer beats Switch on 9 of the 12 factors compared between the two stocks.

About Super Micro Computer

Super Micro Computer, Inc. is engaged in developing and providing end-to-end green computing solutions to the cloud computing, data center, enterprise information technology (IT), big data, high performance computing (HPC) and Internet of Things (IoT)/embedded markets. The Company’s solutions range from server, storage, blade and workstations to full racks, networking devices, server management software and technology support and services. The Company sells its server systems and server subsystems and accessories through a combination of distributors, including value added resellers and system integrators, and other equipment manufacturers (OEMs). As of June 30, 2016, the Company offered over 4,950 stock keeping units (SKUs), including SKUs for server and storage systems, serverboards, chassis, power supplies and other system accessories. The Company develops and manufactures server solutions based upon a modular and open architecture.

About Switch

Switch, Inc. is a technology infrastructure company. The Company is developer and operator of the SUPERNAP, data center facilities, and provides colocation, telecommunications, cloud services, and content ecosystems. The Company designs, constructs and operates hyperscale data centers that address the growing challenges facing the data center industry. The Company’s patented technologies include 100% hot aisle containment rows, exterior wall penetrating multi-mode HVAC units, hot and cold containment segregation structure, redundant data center roofing system, multi-system power containers, data center infrastructure management system (DCIM).

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