Emulex (ELX) and InterDigital (IDCC) Financial Review

Emulex (NYSE: ELX) and InterDigital (NASDAQ:IDCC) are both technology companies, but which is the better stock? We will contrast the two businesses based on the strength of their valuation, analyst recommendations, earnings, dividends, profitability, risk and institutional ownership.

Profitability

This table compares Emulex and InterDigital’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Emulex -61.34% -54.64% -34.34%
InterDigital 42.94% 32.77% 14.02%

Dividends

InterDigital pays an annual dividend of $1.40 per share and has a dividend yield of 1.8%. Emulex does not pay a dividend. InterDigital pays out 19.3% of its earnings in the form of a dividend.

Analyst Recommendations

This is a breakdown of current ratings and recommmendations for Emulex and InterDigital, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Emulex 0 0 0 0 N/A
InterDigital 0 2 2 0 2.50

InterDigital has a consensus target price of $94.00, suggesting a potential upside of 22.72%. Given InterDigital’s higher possible upside, analysts clearly believe InterDigital is more favorable than Emulex.

Earnings & Valuation

This table compares Emulex and InterDigital’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Emulex N/A N/A N/A ($0.96) -8.32
InterDigital $665.85 million 3.99 $309.00 million $7.24 10.58

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

Institutional & Insider Ownership

71.6% of InterDigital shares are held by institutional investors. 1.9% of InterDigital shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Summary

InterDigital beats Emulex on 11 of the 12 factors compared between the two stocks.

About Emulex

Emulex Corporation (Emulex) is a provider of network connectivity, monitoring and management products. It provides solutions for networks that support enterprise, cloud, government and telecommunications sectors. The Company’s portfolio of input/output (I/O) connectivity offerings, including the line of Ethernet and Fiber Channel-based connectivity products, has been designed into server and storage solutions. Its monitoring and management solutions include its network visibility and recording products. The Company’s network connectivity, monitoring and management solutions are offered through two business segments: Connectivity Segment and the Visibility Segment. The Connectivity Segment comprises the Company’s Emulex products, and network connectivity products (NCP) and storage connectivity and other products (SCOP). Its Visibility Segment comprises its Network Visibility Products (NVP).

About InterDigital

InterDigital, Inc. designs and develops technologies for wireless communications. The Company is focused on three technology areas: cellular wireless technology, Internet of things (IoT) technology, and, through its Hillcrest Laboratories, Inc. (Hillcrest Labs) subsidiary, sensor and sensor fusion technology. It offers a range of technologies that are used in digital cellular and wireless products and networks, including second generation (2G), third generation (3G), fourth generation (4G) and IEEE 802-related products and networks. Products incorporating its inventions include mobile devices, such as cellular phones, tablets, notebook computers and wireless personal digital assistants; wireless infrastructure equipment, such as base stations; components, dongles and modules for wireless devices, and IoT devices and software platforms. The Company is developing a range of technologies in the areas of video compression and delivery, security, analytics, and other areas.

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