Analyzing Lam Research (NASDAQ:LRCX) and GlobalFoundries (NASDAQ:GFS)

GlobalFoundries (NASDAQ:GFS) and Lam Research (NASDAQ:LRCX) are both large-cap technology companies, but which is the superior investment? We will compare the two businesses based on the strength of their dividends, profitability, analyst recommendations, institutional ownership, earnings, valuation and risk.

Profitability

This table compares GlobalFoundries and Lam Research’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
GlobalFoundries	10.36%	6.69%	4.69%
Lam Research	31.27%	67.60%	33.48%

Analyst Ratings

This is a breakdown of recent ratings and price targets for GlobalFoundries and Lam Research, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
GlobalFoundries	2	9	8	0	2.32
Lam Research	0	5	26	1	2.88

GlobalFoundries presently has a consensus target price of $75.11, indicating a potential upside of 67.81%. Lam Research has a consensus target price of $357.31, indicating a potential upside of 18.35%. Given GlobalFoundries’ higher probable upside, equities analysts plainly believe GlobalFoundries is more favorable than Lam Research.

Earnings and Valuation

This table compares GlobalFoundries and Lam Research”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
GlobalFoundries	$6.79 billion	3.62	$885.00 million	$1.28	34.97
Lam Research	$23.23 billion	16.26	$7.27 billion	$5.76	52.41

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

Insider & Institutional Ownership

84.6% of Lam Research shares are held by institutional investors. 0.3% of Lam Research shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Volatility & Risk

GlobalFoundries has a beta of 1.8, meaning that its share price is 80% more volatile than the S&P 500. Comparatively, Lam Research has a beta of 1.84, meaning that its share price is 84% more volatile than the S&P 500.

Dividends

GlobalFoundries pays an annual dividend of $0.48 per share and has a dividend yield of 1.1%. Lam Research pays an annual dividend of $1.04 per share and has a dividend yield of 0.3%. GlobalFoundries pays out 37.5% of its earnings in the form of a dividend. Lam Research pays out 18.1% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Lam Research has increased its dividend for 10 consecutive years.

Summary

Lam Research beats GlobalFoundries on 16 of the 18 factors compared between the two stocks.

About GlobalFoundries

GlobalFoundries Inc., a semiconductor foundry, provides range of mainstream wafer fabrication services and technologies worldwide. It manufactures various semiconductor devices, including microprocessors, mobile application processors, baseband processors, network processors, radio frequency modems, microcontrollers, and power management units. GlobalFoundries Inc. has a strategic partnership with Efficient Computer to develop high-performance computer processors. The company was incorporated in 2008 and is headquartered in Malta, New York.

About Lam Research

Lam Research Corporation designs, manufactures, markets, refurbishes, and services semiconductor processing equipment used in the fabrication of integrated circuits. The company offers ALTUS systems to deposit conformal films for tungsten metallization applications; SABRE electrochemical deposition products for copper interconnect transition that offers copper damascene manufacturing; SOLA ultraviolet thermal processing products for film treatments; and VECTOR plasma-enhanced CVD ALD products. It also provides SPEED gapfill high-density plasma chemical vapor deposition products; and Striker single-wafer atomic layer deposition products for dielectric film solutions. In addition, the company offers Flex for dielectric etch applications; Kiyo for conductor etch applications; Syndion for through-silicon via etch applications; and Versys metal products for metal etch processes. Further, it provides Coronus bevel clean products to enhance die yield; Da Vinci, DV-Prime, EOS, and SP series products to address various wafer cleaning applications; and Metryx mass metrology systems for high precision in-line mass measurement in semiconductor wafer manufacturing. The company sells its products and services to semiconductors industry in the United States, China, Europe, Japan, Korea, Southeast Asia, Taiwan, and internationally. The company was incorporated in 1980 and is headquartered in Fremont, California.