Critical Contrast: Silicon Motion (SIMO) versus FormFactor (FORM)

Silicon Motion (NASDAQ: SIMO) and FormFactor (NASDAQ:FORM) are both small-cap computer and technology companies, but which is the better business? We will contrast the two companies based on the strength of their valuation, risk, dividends, analyst recommendations, profitability, institutional ownership and earnings.

Analyst Ratings

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This is a breakdown of recent ratings and price targets for Silicon Motion and FormFactor, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Silicon Motion 1 1 12 0 2.79
FormFactor 0 1 4 1 3.00

Silicon Motion presently has a consensus price target of $56.98, suggesting a potential upside of 19.00%. FormFactor has a consensus price target of $18.83, suggesting a potential upside of 42.14%. Given FormFactor’s stronger consensus rating and higher possible upside, analysts clearly believe FormFactor is more favorable than Silicon Motion.

Dividends

Silicon Motion pays an annual dividend of $0.99 per share and has a dividend yield of 2.1%. FormFactor does not pay a dividend. Silicon Motion pays out 47.4% of its earnings in the form of a dividend.

Valuation & Earnings

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

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Silicon Motion $523.40 million 3.23 $75.03 million $2.09 22.91
FormFactor $548.44 million 1.79 $40.91 million $1.00 13.25

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

Profitability

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

Net Margins Return on Equity Return on Assets
Silicon Motion 14.34% 15.33% 11.63%
FormFactor 7.46% 16.81% 11.46%

Volatility & Risk

Silicon Motion has a beta of 0.6, meaning that its stock price is 40% less volatile than the S&P 500. Comparatively, FormFactor has a beta of 1.34, meaning that its stock price is 34% more volatile than the S&P 500.

Institutional & Insider Ownership

85.8% of Silicon Motion shares are owned by institutional investors. Comparatively, 87.2% of FormFactor shares are owned by institutional investors. 2.3% of FormFactor shares are owned by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock will outperform the market over the long term.

Summary

FormFactor beats Silicon Motion on 9 of the 17 factors compared between the two stocks.

Silicon Motion Company Profile

Silicon Motion Technology Corporation, together with its subsidiaries, designs, develops, and markets semiconductor solutions for the mobile storage and mobile communications markets worldwide. It offers embedded storage and expandable storage products, including NAND flash controllers, such as embedded MultiMediaCard (eMMC), client solid-state drive (SSD), flash memory card, and Universal Serial Bus flash drive controllers. The company also provides specialty storage solutions, such as customized enterprise-grade Peripheral Component Interconnect Express (PCIe) SSDs; and industrial-grade and commercial-grade single-chip SSDs. In addition, it offers specialty radio frequency integrated circuits (RF ICs), such as mobile TV system-on-chips and handset RF ICs. The company's products are used in smartphones, tablets, digital cameras, camcorders, and desktop and notebook PCs, as well as in industrial, enterprise, commercial, and other applications. It offers its products under the SMI, Shannon Systems, Ferri SSD, Ferri-eMMC, and FCI brands. The company markets and sells its products through direct sales personnel and independent electronics distributors to original equipment manufacturers and module makers. Silicon Motion Technology Corporation was founded in 1995 and is based in Kowloon, Hong Kong.

FormFactor Company Profile

FormFactor, Inc. designs, manufactures, and sells probe cards, analytical probes, probe stations, integrated measurement systems, thermal sub-systems, and reliability test systems. The company offers probe cards that are used to test various semiconductor device types, including system on a chip products, mobile application processors, microprocessors, microcontrollers, and graphic processors, as well as radio frequency, analog, mixed signal, image sensor, electro-optical, dynamic random access memory, NAND flash memory, and NOR flash memory devices; and analytical probes, which are used for a range of applications, including device characterization, electrical simulation model development, failure analysis, and prototype design debugging for universities, research institutions, semiconductor integrated device manufacturers, semiconductor foundries, and fabless semiconductor companies. It also provides probing systems for semiconductor design engineers to capture and analyze accurate data; integrated measurement systems that include test instrumentation, probe, cabling configurations, and software to enable fast, accurate, and on-wafer data collection for complex application and measurement needs; thermal subsystems that produce thermal chucks and other test systems used in probe stations. In addition, the company offers on-site probe card maintenance and service training, seminars, and telephone support services. FormFactor, Inc markets and sells its products through direct sales force, manufacturers' representatives, and distributors in the United States, South Korea, Taiwan, Japan, and rest of the Asia-Pacific, as well as in Europe and internationally. The company was founded in 1993 and is headquartered in Livermore, California.

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