Contrasting Applied Optoelectronics (NASDAQ:AAOI) and OSI Systems (NASDAQ:OSIS)

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

Profitability

This table compares Applied Optoelectronics and OSI Systems’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Applied Optoelectronics	-38.61%	-22.36%	-12.08%
OSI Systems	8.15%	18.22%	7.48%

Insider and Institutional Ownership

61.7% of Applied Optoelectronics shares are owned by institutional investors. Comparatively, 89.2% of OSI Systems shares are owned by institutional investors. 5.4% of Applied Optoelectronics shares are owned by insiders. Comparatively, 5.2% of OSI Systems 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.

Risk & Volatility

Applied Optoelectronics has a beta of 2.36, suggesting that its stock price is 136% more volatile than the S&P 500. Comparatively, OSI Systems has a beta of 1.19, suggesting that its stock price is 19% more volatile than the S&P 500.

Analyst Ratings

This is a breakdown of current recommendations and price targets for Applied Optoelectronics and OSI Systems, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Applied Optoelectronics	1	1	3	0	2.40
OSI Systems	0	1	5	0	2.83

Applied Optoelectronics currently has a consensus price target of $27.60, suggesting a potential upside of 26.26%. OSI Systems has a consensus price target of $212.00, suggesting a potential upside of 2.81%. Given Applied Optoelectronics’ higher probable upside, analysts clearly believe Applied Optoelectronics is more favorable than OSI Systems.

Earnings and Valuation

This table compares Applied Optoelectronics and OSI Systems”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Applied Optoelectronics	$209.55 million	4.89	-$56.05 million	($2.06)	-10.61
OSI Systems	$1.65 billion	2.10	$128.15 million	$7.77	26.54

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

Summary

OSI Systems beats Applied Optoelectronics on 10 of the 14 factors compared between the two stocks.

About Applied Optoelectronics

Applied Optoelectronics, Inc. designs, manufactures, and sells fiber-optic networking products in the United States, Taiwan, and China. It offers optical modules, optical filters, lasers, laser components, subassemblies, transmitters and transceivers, turn-key equipment, headend, node, distribution equipment, and amplifiers. The company sells its products to internet data center operators, cable television, telecom equipment manufacturers, fiber-to-the-home, and internet service providers through its direct and indirect sales channels. Applied Optoelectronics, Inc. was incorporated in 1997 and is headquartered in Sugar Land, Texas.

About OSI Systems

OSI Systems, Inc. designs and manufactures electronic systems and components. It operates in three segments: Security, Healthcare, and Optoelectronics and Manufacturing. The Security segment offers baggage and parcel inspection, cargo and vehicle inspection, hold baggage and people screening, radiation monitoring, explosive and narcotics trace detection systems, and optical inspection systems under the Rapiscan name. It also provides site design, installation, training, and technical support services; and turnkey security screening solutions under the S2 name. The Healthcare segment offers patient monitoring, cardiology and remote monitoring, and connected care systems and accessories under the Spacelabs name for use in critical care, emergency, and perioperative areas within hospitals, physicians' offices, medical clinics, and ambulatory surgery centers. The Optoelectronics and Manufacturing segment provides optoelectronic devices under the OSI Optoelectronics, OSI LaserDiode, OSI Laserscan, and Advanced Photonix names for the aerospace and defense, avionics, medical imaging and diagnostics, biochemistry analysis, pharmaceutical, nanotechnology, telecommunications, construction, and homeland security markets. It also offers electronics manufacturing services to original equipment manufacturers and end users for medical, automotive, defense, aerospace, industrial, and consumer applications under the OSI Electronics, APlus Products, Altaflex, and PFC Flexible Circuits names; LCD displays for medical, industrial, and consumer electronics applications; and flex circuits for OEM customers. This segment offers laser-based remote sensing devices to detect and classify vehicles in toll and traffic management systems under the OSI Laserscan and Autosense names; and solid-state laser products for aerospace, defense, telecommunication, and medical applications under the OSI LaserDiode name. The company was incorporated in 1987 and is headquartered in Hawthorne, California.