Analyzing Applied Optoelectronics (NASDAQ:AAOI) & Ultra Clean (NASDAQ:UCTT)

Applied Optoelectronics (NASDAQ:AAOI) and Ultra Clean (NASDAQ:UCTT) are both small-cap computer and technology companies, but which is the superior investment? We will compare the two businesses based on the strength of their analyst recommendations, dividends, profitability, valuation, earnings, risk and institutional ownership.

Volatility and Risk

Applied Optoelectronics has a beta of 2.19, indicating that its stock price is 119% more volatile than the S&P 500. Comparatively, Ultra Clean has a beta of 1.21, indicating that its stock price is 21% more volatile than the S&P 500.

Earnings & Valuation

This table compares Applied Optoelectronics and Ultra Clean’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Applied Optoelectronics $267.46 million 1.05 -$2.15 million $0.53 26.34
Ultra Clean $1.10 billion 0.89 $36.60 million $1.66 14.70

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

Insider and Institutional Ownership

61.7% of Applied Optoelectronics shares are held by institutional investors. Comparatively, 83.4% of Ultra Clean shares are held by institutional investors. 6.9% of Applied Optoelectronics shares are held by company insiders. Comparatively, 1.8% of Ultra Clean shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.


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

Net Margins Return on Equity Return on Assets
Applied Optoelectronics -19.57% -8.12% -5.31%
Ultra Clean -0.02% 7.39% 3.38%

Analyst Recommendations

This is a breakdown of current ratings and target prices for Applied Optoelectronics and Ultra Clean, as provided by

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Applied Optoelectronics 2 4 1 0 1.86
Ultra Clean 0 3 3 0 2.50

Applied Optoelectronics currently has a consensus target price of $11.50, indicating a potential downside of 17.62%. Ultra Clean has a consensus target price of $21.40, indicating a potential downside of 12.28%. Given Ultra Clean’s stronger consensus rating and higher possible upside, analysts clearly believe Ultra Clean is more favorable than Applied Optoelectronics.


Ultra Clean beats Applied Optoelectronics on 10 of the 14 factors compared between the two stocks.

About Applied Optoelectronics

Applied Optoelectronics, Inc. designs, manufactures, and sells various fiber-optic networking products worldwide. It offers optical modules, lasers, transmitters and transceivers, and turn-key equipment, as well as headend, node, and distribution equipment. The company sells its products to Internet data center operators, cable television and telecommunications equipment manufacturers, and Internet service providers through its direct and indirect sales channels. Applied Optoelectronics, Inc. was founded in 1997 and is headquartered in Sugar Land, Texas.

About Ultra Clean

Ultra Clean Holdings, Inc. designs, develops, prototypes, engineers, manufactures, and tests production tools, modules, and subsystems for the semiconductor and display capital equipment industries primarily in North America, Asia, and Europe. It offers precision robotic systems that are used when accurate controlled motion is required; gas delivery systems, which include one or more gas lines consisting of small diameter internally polished stainless steel tubing products, filters, mass flow controllers, regulators, pressure transducers and valves, component heaters, and an integrated electronic and/or pneumatic control system; and various industrial and automation production equipment products. The company also provides subsystems, such as wafer cleaning modules; chemical delivery modules that deliver gases and reactive chemicals in a liquid or gaseous form from a centralized subsystem to the reaction chamber; frame assemblies, which are support structures fabricated from steel tubing or folded sheet metal; and top-plate assemblies. In addition, it offers fluid delivery systems consists of one or more chemical delivery units; process modules, which are the subsystems of semiconductor manufacturing tools that process integrated circuits onto wafers; and other high level assemblies. The company primarily serves original equipment manufacturing customers in the semiconductor capital equipment, consumer, medical, energy, industrial, and research industries. Ultra Clean Holding, Inc. was founded in 1991 and is headquartered in Hayward, California.

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