Critical Contrast: Red Cat (NASDAQ:RCAT) versus AeroVironment (NASDAQ:AVAV)

Red Cat (NASDAQ:RCAT) and AeroVironment (NASDAQ:AVAV) are both industrials companies, but which is the superior business? We will compare the two businesses based on the strength of their institutional ownership, earnings, dividends, analyst recommendations, valuation, risk and profitability.

Analyst Recommendations

This is a breakdown of current recommendations for Red Cat and AeroVironment, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Red Cat	2	1	5	2	2.70
AeroVironment	1	5	19	2	2.81

Red Cat presently has a consensus price target of $16.29, suggesting a potential upside of 265.15%. AeroVironment has a consensus price target of $223.86, suggesting a potential upside of 81.22%. Given Red Cat’s higher probable upside, analysts plainly believe Red Cat is more favorable than AeroVironment.

Volatility and Risk

Red Cat has a beta of 1.72, indicating that its stock price is 72% more volatile than the S&P 500. Comparatively, AeroVironment has a beta of 1.42, indicating that its stock price is 42% more volatile than the S&P 500.

Institutional & Insider Ownership

38.0% of Red Cat shares are held by institutional investors. Comparatively, 86.4% of AeroVironment shares are held by institutional investors. 12.5% of Red Cat shares are held by company insiders. Comparatively, 0.8% of AeroVironment shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Earnings & Valuation

This table compares Red Cat and AeroVironment”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Red Cat	$40.73 million	13.44	-$72.07 million	($0.81)	-5.51
AeroVironment	$1.98 billion	3.18	-$265.12 million	($2.34)	-52.79

Red Cat has higher earnings, but lower revenue than AeroVironment. AeroVironment is trading at a lower price-to-earnings ratio than Red Cat, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Red Cat and AeroVironment’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Red Cat	-136.26%	-32.25%	-28.48%
AeroVironment	-5.77%	4.04%	3.13%

About Red Cat

Red Cat Holdings, Inc. engages in the provision of various products, services, and solutions to the drone industry. The company operates through two segments: Enterprise and Consumer. It built infrastructure to manages drone fleets and fly, and provide services remotely, navigate confined industrial interior spaces and dangerous military environment. Red Cat Holdings, Inc. is based in San Juan, Puerto Rico.

About AeroVironment

AeroVironment, Inc. designs, develops, produces, delivers, and supports a portfolio of robotic systems and related services for government agencies and businesses in the United States and internationally. It operates through Small Unmanned Aircraft Systems (SUAS), Tactical Missile System (TMS), Medium Unmanned Aircraft Systems (MUAS), and High Altitude Pseudo-Satellite Systems (HAPS) segments. The company supplies UAS, TMS, unmanned ground vehicle, and related services primarily to organizations within the U.S. Department of Defense, other federal agencies, and to international allied governments. It also designs, engineers, tools, and manufactures unmanned aerial and aircraft systems, including airborne platforms, payloads and payload integration, ground control systems, and ground support equipment and other items and services related to unmanned aircraft systems. In addition, the company offers small UAS products, including training, spare parts, product repair, product replacement, and the customer contracted operation. Further, it develops high-altitude pseudo-satellite UAS systems. AeroVironment, Inc. was incorporated in 1971 and is headquartered in Arlington, Virginia.