Financial Survey: Allegro MicroSystems (NASDAQ:ALGM) and ARM (NASDAQ:ARM)

ARM (NASDAQ:ARM) and Allegro MicroSystems (NASDAQ:ALGM) are both technology companies, but which is the better stock? We will contrast the two companies based on the strength of their institutional ownership, analyst recommendations, risk, earnings, dividends, valuation and profitability.

Institutional and Insider Ownership

7.5% of ARM shares are owned by institutional investors. Comparatively, 56.5% of Allegro MicroSystems shares are owned by institutional investors. 0.5% of Allegro MicroSystems shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Profitability

This table compares ARM and Allegro MicroSystems’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
ARM	20.25%	12.24%	9.41%
Allegro MicroSystems	1.50%	8.30%	5.65%

Earnings and Valuation

This table compares ARM and Allegro MicroSystems”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
ARM	$4.92 billion	60.91	$904.00 million	$0.97	289.24
Allegro MicroSystems	$890.10 million	8.97	-$14.90 million	$0.06	714.17

ARM has higher revenue and earnings than Allegro MicroSystems. ARM is trading at a lower price-to-earnings ratio than Allegro MicroSystems, indicating that it is currently the more affordable of the two stocks.

Risk and Volatility

ARM has a beta of 3.9, meaning that its share price is 290% more volatile than the S&P 500. Comparatively, Allegro MicroSystems has a beta of 1.94, meaning that its share price is 94% more volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of current ratings for ARM and Allegro MicroSystems, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
ARM	1	7	18	0	2.65
Allegro MicroSystems	1	2	9	0	2.67

ARM presently has a consensus target price of $285.33, suggesting a potential upside of 1.70%. Allegro MicroSystems has a consensus target price of $52.80, suggesting a potential upside of 23.22%. Given Allegro MicroSystems’ stronger consensus rating and higher probable upside, analysts clearly believe Allegro MicroSystems is more favorable than ARM.

Summary

ARM beats Allegro MicroSystems on 9 of the 14 factors compared between the two stocks.

About ARM

Arm Holdings Plc engages in the licensing, marketing, research, and development of microprocessors, systems IP, graphics processing units, physical IP and associated systems IP, software, and tools. It operates through the following geographical segments: United Kingdom, United States, and Other Countries. The company was founded on November 12, 1990 and is headquartered in Cambridge, the United Kingdom.

About Allegro MicroSystems

Allegro MicroSystems, Inc., together with its subsidiaries, designs, develops, manufactures, and markets sensor integrated circuits (ICs) and application-specific analog power ICs for motion control and energy-efficient systems. Its products include magnetic sensor ICs, such as position, speed, and current sensor ICs; and power ICs comprising motor driver ICs, regulator and LED driver ICs, and isolated gate drivers. The company sells its products to original equipment manufacturers and distributors primarily in the automotive and industrial markets through its direct sales force, third party distributors, independent sales representatives, and consignment. It operates in the United States, rest of the Americas, Europe, Japan, Greater China, South Korea, and other Asian markets. The company was founded in 1990 and is headquartered in Manchester, New Hampshire. Allegro MicroSystems, Inc. is a subsidiary of Sanken Electric Co., Ltd.