Financial Analysis: Applied Optoelectronics (AAOI) and Cypress Semiconductor (CY)

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

Valuation and Earnings

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This table compares Applied Optoelectronics and Cypress Semiconductor’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Applied Optoelectronics $382.33 million 1.70 $73.95 million $4.23 7.87
Cypress Semiconductor $2.33 billion 2.48 -$80.91 million $0.60 26.88

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

Profitability

This table compares Applied Optoelectronics and Cypress Semiconductor’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Applied Optoelectronics 19.34% 30.08% 22.41%
Cypress Semiconductor -4.02% 12.48% 6.22%

Dividends

Cypress Semiconductor pays an annual dividend of $0.44 per share and has a dividend yield of 2.7%. Applied Optoelectronics does not pay a dividend. Cypress Semiconductor pays out 73.3% of its earnings in the form of a dividend.

Analyst Recommendations

This is a breakdown of recent recommendations for Applied Optoelectronics and Cypress Semiconductor, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Applied Optoelectronics 3 3 3 2 2.36
Cypress Semiconductor 1 3 9 0 2.62

Applied Optoelectronics presently has a consensus target price of $45.15, suggesting a potential upside of 35.67%. Cypress Semiconductor has a consensus target price of $19.21, suggesting a potential upside of 19.08%. Given Applied Optoelectronics’ higher possible upside, equities research analysts plainly believe Applied Optoelectronics is more favorable than Cypress Semiconductor.

Insider & Institutional Ownership

63.2% of Applied Optoelectronics shares are owned by institutional investors. Comparatively, 84.8% of Cypress Semiconductor shares are owned by institutional investors. 8.2% of Applied Optoelectronics shares are owned by insiders. Comparatively, 0.4% of Cypress Semiconductor shares are owned by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Volatility & Risk

Applied Optoelectronics has a beta of 2.63, meaning that its share price is 163% more volatile than the S&P 500. Comparatively, Cypress Semiconductor has a beta of 2.04, meaning that its share price is 104% more volatile than the S&P 500.

Summary

Applied Optoelectronics beats Cypress Semiconductor on 10 of the 17 factors compared between the two stocks.

Applied Optoelectronics Company Profile

Applied Optoelectronics, Inc. is a vertically integrated provider of fiber-optic networking products, primarily for networking end markets, such as Internet data center, cable television (CATV), fiber-to-the-home (FTTH) and telecommunications (telecom). The Company designs and manufactures a range of optical communications products at varying levels of integration, from components, subassemblies and modules to turnkey equipment. To Internet-based data center operators, it supplies optical transceivers that plug into switches and servers within the data center and allow these network devices to send and receive data over fiber optic cables. The Company supplies a range of products, including lasers, transmitters and transceivers, and turnkey equipment, to the CATV market. The Company designs, manufactures and integrates its own analog and digital lasers using a combination of Metal Organic Chemical Vapor Deposition (MOCVD) and its Molecular Beam Epitaxy (MBE) fabrication process.

Cypress Semiconductor Company Profile

Cypress Semiconductor Corporation manufactures embedded system solutions for automotive, industrial, home automation and appliances, consumer electronics and medical products. The Company’s segments include Microcontroller and Connectivity Division (MCD), and Memory Products Division (MPD). MCD focuses on microcontroller (MCU), analog and wireless and wired connectivity solutions. MPD focuses on parallel and serial NOR flash memories, NAND flash memories, static random access memory (SRAM), ferroelectric-random access memory (F-RAM) ferroelectric memory devices and other specialty memories. The Company’s products include Traveo MCUs and Flexible MCUs; PSoC 1, PSoC 3, PSoC 4 and PSoC 5LP; CapSense, and TrueTouch Analog Power Management integrated circuits (PMICs) and energy harvesting solutions.

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