Applied Optoelectronics (NASDAQ: AAOI) and Brocade Communications Systems (NASDAQ:BRCD) are both computer and technology companies, but which is the superior investment? We will contrast the two businesses based on the strength of their risk, analyst recommendations, profitability, institutional ownership, valuation, earnings and dividends.

Analyst Recommendations

This is a breakdown of recent ratings and price targets for Applied Optoelectronics and Brocade Communications Systems, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Applied Optoelectronics 3 0 6 1 2.50
Brocade Communications Systems 1 7 0 0 1.88

Applied Optoelectronics presently has a consensus target price of $83.38, indicating a potential upside of 28.92%. Brocade Communications Systems has a consensus target price of $12.45, indicating a potential upside of 4.18%. Given Applied Optoelectronics’ stronger consensus rating and higher possible upside, research analysts clearly believe Applied Optoelectronics is more favorable than Brocade Communications Systems.

Earnings & Valuation

This table compares Applied Optoelectronics and Brocade Communications Systems’ top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Applied Optoelectronics $368.63 million 3.39 $98.06 million $4.17 15.51
Brocade Communications Systems $2.34 billion 2.11 $354.21 million $0.07 170.71

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

Volatility and Risk

Applied Optoelectronics has a beta of 3.06, meaning that its stock price is 206% more volatile than the S&P 500. Comparatively, Brocade Communications Systems has a beta of 0.64, meaning that its stock price is 36% less volatile than the S&P 500.

Dividends

Brocade Communications Systems pays an annual dividend of $0.22 per share and has a dividend yield of 1.8%. Applied Optoelectronics does not pay a dividend. Brocade Communications Systems pays out 314.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Insider and Institutional Ownership

81.6% of Applied Optoelectronics shares are owned by institutional investors. Comparatively, 83.4% of Brocade Communications Systems shares are owned by institutional investors. 8.2% of Applied Optoelectronics shares are owned by insiders. Comparatively, 1.8% of Brocade Communications Systems shares are owned by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.

Profitability

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

Net Margins Return on Equity Return on Assets
Applied Optoelectronics 21.92% 31.31% 21.96%
Brocade Communications Systems 1.30% 5.42% 2.84%

Summary

Applied Optoelectronics beats Brocade Communications Systems on 12 of the 17 factors compared between the two stocks.

About Applied Optoelectronics

Applied Optoelectronics, Inc. is a vertically integrated provider of fiber-optic networking products, primarily for networking end markets, such as Internet data center, cable television (CATV), fiber-to-the-home (FTTH) and telecommunications (telecom). The Company designs and manufactures a range of optical communications products at varying levels of integration, from components, subassemblies and modules to turnkey equipment. To Internet-based data center operators, it supplies optical transceivers that plug into switches and servers within the data center and allow these network devices to send and receive data over fiber optic cables. The Company supplies a range of products, including lasers, transmitters and transceivers, and turnkey equipment, to the CATV market. The Company designs, manufactures and integrates its own analog and digital lasers using a combination of Metal Organic Chemical Vapor Deposition (MOCVD) and its Molecular Beam Epitaxy (MBE) fabrication process.

About Brocade Communications Systems

Brocade Communications Systems, Inc. (Brocade) is a supplier of networking hardware, software and services, including storage area networking (SAN) solutions and Internet protocol (IP) networking solutions for businesses and organizations of various types and sizes. The Company operates through three segments: SAN Products, IP Networking Products and Global Services. The SAN Products segment includes infrastructure products and solutions that help customers develop and deploy storage and server consolidation, disaster recovery and data security. The IP Networking Products segment includes Layer 2 and Layer 3 Ethernet switches, and routers to connect users over private and public networks. The Global Services segment includes break or fix maintenance, installation, consulting, network management and software maintenance, and post-contract customer support. Its products enable customers to deploy architectures and technologies, including virtualization and cloud computing.

Receive News & Stock Ratings for Applied Optoelectronics Inc. Daily - Enter your email address below to receive a concise daily summary of the latest news and analysts' ratings for Applied Optoelectronics Inc. and related stocks with our FREE daily email newsletter.