Analyzing TE Connectivity (TEL) & Avnet (AVT)

TE Connectivity (NYSE: TEL) and Avnet (NYSE:AVT) are both computer and technology companies, but which is the better investment? We will contrast the two businesses based on the strength of their valuation, risk, earnings, analyst recommendations, dividends, institutional ownership and profitability.

Profitability

This table compares TE Connectivity and Avnet’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
TE Connectivity 9.39% 19.89% 9.95%
Avnet -0.72% 8.08% 4.27%

Dividends

TE Connectivity pays an annual dividend of $1.60 per share and has a dividend yield of 1.7%. Avnet pays an annual dividend of $0.76 per share and has a dividend yield of 1.9%. TE Connectivity pays out 33.1% of its earnings in the form of a dividend. Avnet pays out 23.5% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. TE Connectivity has raised its dividend for 7 consecutive years and Avnet has raised its dividend for 4 consecutive years. Avnet is clearly the better dividend stock, given its higher yield and lower payout ratio.

Earnings and Valuation

This table compares TE Connectivity and Avnet’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
TE Connectivity $13.11 billion 2.53 $1.68 billion $4.83 19.58
Avnet $17.44 billion 0.28 $525.27 million $3.24 12.58

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

Volatility & Risk

TE Connectivity has a beta of 1.08, indicating that its stock price is 8% more volatile than the S&P 500. Comparatively, Avnet has a beta of 0.99, indicating that its stock price is 1% less volatile than the S&P 500.

Insider & Institutional Ownership

92.1% of TE Connectivity shares are held by institutional investors. Comparatively, 96.4% of Avnet shares are held by institutional investors. 0.7% of TE Connectivity shares are held by company insiders. Comparatively, 1.7% of Avnet shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Analyst Ratings

This is a breakdown of current ratings and target prices for TE Connectivity and Avnet, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
TE Connectivity 0 2 10 0 2.83
Avnet 1 6 1 0 2.00

TE Connectivity presently has a consensus price target of $141.64, suggesting a potential upside of 49.75%. Avnet has a consensus price target of $39.17, suggesting a potential downside of 3.89%. Given TE Connectivity’s stronger consensus rating and higher possible upside, analysts clearly believe TE Connectivity is more favorable than Avnet.

Summary

TE Connectivity beats Avnet on 12 of the 17 factors compared between the two stocks.

About TE Connectivity

TE Connectivity Ltd., together with its subsidiaries, engages in the design, manufacture, and sale of connectivity and sensors solutions in the Americas, Europe, the Middle East, Africa, and the Asia?Pacific. The company operates through three segments: Transportation Solutions, Industrial Solutions, and Communications Solutions. The Transportation Solutions segment primarily provides terminals and connector systems and components, sensors, and relays, as well as application tooling, wires, and heat shrink tubing for use in the automotive, commercial transportation, and sensor markets. The Industrial Solutions segment offers terminals and connector systems and components; heat shrink tubing; relays; and wires and cables for industrial equipment, aerospace, defense, oil and gas, and energy markets. The Communications Solutions segment supplies electronic components, such as terminals and connector systems and components, undersea telecommunication systems, antennas, relays, and heat shrink tubing for the data and devices, subsea communications, and appliances markets. TE Connectivity Ltd. offers its products to approximately 150 countries primarily through direct selling to manufacturers, as well as through third-party distributors. The company was formerly known as Tyco Electronics Ltd. and changed its name to TE Connectivity Ltd. in March 2011. TE Connectivity Ltd. was incorporated in 2000 and is based in Schaffhausen, Switzerland.

About Avnet

Avnet, Inc., together with its subsidiaries, distributes electronic components worldwide. The company operates through two segments, Electronic Components and Premier Farnell. The Electronic Components segment markets and sells semiconductors; electronic components, including interconnect, passive and electromechanical devices; and other integrated components from electronic component manufacturers. This segment also offers customer support services, which facilitate customers to evaluate, design-in, and procure electronic components throughout the lifecycle of their technology products and systems. In addition, it provides integrated solutions, such as technical design, integration, and assembly of embedded products, systems, and solutions primarily for industrial applications, as well as for intelligent embedded and innovative display solutions comprising touch and passive displays. Further, it develops and manufactures standard board and industrial subsystems, and application-specific devices that enable it to produce systems tailored to specific customer requirements. Additionally, this segment offers design chain support that provides engineers with technical design solutions; engineering and technical resources to support product design, bill of materials development, and technical education and training; and supply chain solutions that provide support and logistical services to original equipment manufacturers, electronic manufacturing service providers, and electronic component manufacturers. It serves various markets, including automotive, communications, computer hardware and peripherals, industrial and manufacturing, medical equipment, and defense and aerospace. The Premier Farnell segment distributes electronic components primarily to support design engineers, maintenance and test engineers, makers, and entrepreneurs. Avnet, Inc. was founded in 1921 and is headquartered in Phoenix, Arizona.

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