Head to Head Review: Neonode (NASDAQ:NEON) vs. Fabrinet (FN)

Neonode (NASDAQ: NEON) and Fabrinet (NYSE:FN) are both small-cap computer and technology companies, but which is the better investment? We will compare the two businesses based on the strength of their profitabiliy, earnings, institutional ownership, dividends, analyst recommendations, valuation and risk.

Insider and Institutional Ownership

25.4% of Neonode shares are held by institutional investors. Comparatively, 94.2% of Fabrinet shares are held by institutional investors. 15.8% of Neonode shares are held by insiders. Comparatively, 4.3% of Fabrinet shares are held by 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.

Earnings & Valuation

This table compares Neonode and Fabrinet’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Neonode $9.41 million 6.12 -$3.47 million ($0.11) -10.73
Fabrinet $1.33 billion 1.28 $121.84 million $2.38 19.21

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

Profitability

This table compares Neonode and Fabrinet’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Neonode -50.46% -169.76% -58.14%
Fabrinet 6.74% 14.95% 9.71%

Analyst Ratings

This is a summary of current recommendations and price targets for Neonode and Fabrinet, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Neonode 0 0 1 0 3.00
Fabrinet 0 0 4 1 3.20

Neonode currently has a consensus target price of $4.00, indicating a potential upside of 238.98%. Fabrinet has a consensus target price of $53.55, indicating a potential upside of 17.15%. Given Neonode’s higher possible upside, analysts clearly believe Neonode is more favorable than Fabrinet.

Volatility & Risk

Neonode has a beta of 1.2, indicating that its stock price is 20% more volatile than the S&P 500. Comparatively, Fabrinet has a beta of 1.08, indicating that its stock price is 8% more volatile than the S&P 500.

Summary

Fabrinet beats Neonode on 10 of the 14 factors compared between the two stocks.

About Neonode

Neonode Inc., formerly SBE, Inc., develops and licenses user interfaces and optical infrared touch solutions. The Company’s technology offers multiple features, including the ability to sense an object’s size, depth, velocity, pressure and proximity to any type of surface. It operates through the touch technology licensing business segment. It licenses its multi-touch technology to original equipment manufacturers (OEMs) and original design manufacturers (ODMs) who incorporate it into devices that they produce and sell. In addition, it develops prototype products and is engaged in product engineering design discussions with various global OEMs and ODMs. The Company offers its family of touch solutions under the brands MultiSensing and zForce. Its solution provides sense enablement through touch and proximity sensing. Its technology has application in various fields, such as laptop computers, all-in-one computers, standalone monitors, printer products and global positioning systems.

About Fabrinet

Fabrinet provides optical packaging and precision optical, electro-mechanical and electronic manufacturing services to original equipment manufacturers (OEMs) of products, such as optical communication components, modules and sub-systems, industrial lasers, medical devices and sensors. The Company offers a range of optical and electro-mechanical capabilities across the manufacturing process, including process design and engineering, supply chain management, manufacturing, complex printed circuit board assembly, advanced packaging, integration, final assembly and test. The Company’s customer base includes companies in industries that require precision manufacturing capabilities, such as optical communications, industrial lasers, automotive, medical and sensors. Its customers in these industries support end-markets, including automotive, biotechnology, communications, materials processing, medical devices, metrology and semiconductor processing.

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