ARM (NASDAQ:ARM) and Applied Materials (NASDAQ:AMAT) Critical Comparison

Applied Materials (NASDAQ:AMAT) and ARM (NASDAQ:ARM) are both large-cap computer and technology companies, but which is the superior investment? We will contrast the two businesses based on the strength of their profitability, risk, dividends, valuation, analyst recommendations, earnings and institutional ownership.

Valuation and Earnings

This table compares Applied Materials and ARM”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Applied Materials	$28.37 billion	7.36	$7.00 billion	$8.68	30.21
ARM	$4.01 billion	32.53	$792.00 million	$0.78	158.19

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

Risk & Volatility

Applied Materials has a beta of 1.67, indicating that its share price is 67% more volatile than the S&P 500. Comparatively, ARM has a beta of 4.24, indicating that its share price is 324% more volatile than the S&P 500.

Insider and Institutional Ownership

80.6% of Applied Materials shares are owned by institutional investors. Comparatively, 7.5% of ARM shares are owned by institutional investors. 0.2% of Applied Materials shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Analyst Ratings

This is a summary of recent ratings and price targets for Applied Materials and ARM, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Applied Materials	0	14	20	0	2.59
ARM	1	7	18	1	2.70

Applied Materials currently has a consensus target price of $242.15, indicating a potential downside of 7.65%. ARM has a consensus target price of $177.80, indicating a potential upside of 44.09%. Given ARM’s stronger consensus rating and higher probable upside, analysts plainly believe ARM is more favorable than Applied Materials.

Profitability

This table compares Applied Materials and ARM’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Applied Materials	24.67%	39.26%	22.13%
ARM	18.81%	15.03%	11.39%

Summary

Applied Materials beats ARM on 9 of the 15 factors compared between the two stocks.

About Applied Materials

Applied Materials, Inc. engages in the provision of manufacturing equipment, services, and software to the semiconductor, display, and related industries. The company operates through three segments: Semiconductor Systems, Applied Global Services, and Display and Adjacent Markets. The Semiconductor Systems segment develops, manufactures, and sells various manufacturing equipment that is used to fabricate semiconductor chips or integrated circuits. This segment also offers various technologies, including epitaxy, ion implantation, oxidation/nitridation, rapid thermal processing, physical vapor deposition, chemical vapor deposition, chemical mechanical planarization, electrochemical deposition, atomic layer deposition, etching, and selective deposition and removal, as well as metrology and inspection tools. The Applied Global Services segment provides integrated solutions to optimize equipment and fab performance and productivity comprising spares, upgrades, services, remanufactured earlier generation equipment, and factory automation software for semiconductor, display, and other products. The Display and Adjacent Markets segment offers products for manufacturing liquid crystal displays; organic light-emitting diodes; and other display technologies for TVs, monitors, laptops, personal computers, electronic tablets, smart phones, and other consumer-oriented devices. It operates in the United States, China, Korea, Taiwan, Japan, Southeast Asia, and Europe. The company was incorporated in 1967 and is headquartered in Santa Clara, California.

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.