Microsemi Communications (NASDAQ: VTSS) and O2Micro International (NASDAQ:OIIM) are both small-cap integrated circuits companies, but which is the superior investment? We will contrast the two companies based on the strength of their dividends, analyst recommendations, profitability, valuation, risk, institutional ownership and earnings.

Insider and Institutional Ownership

39.9% of O2Micro International shares are held by institutional investors. 8.0% of O2Micro International shares are held by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.

Analyst Recommendations

This is a summary of recent recommendations and price targets for Microsemi Communications and O2Micro International, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Microsemi Communications 0 0 0 0 N/A
O2Micro International 0 1 0 0 2.00

O2Micro International has a consensus price target of $3.50, indicating a potential upside of 110.84%. Given O2Micro International’s higher probable upside, analysts clearly believe O2Micro International is more favorable than Microsemi Communications.

Risk & Volatility

Microsemi Communications has a beta of 1.9, suggesting that its stock price is 90% more volatile than the S&P 500. Comparatively, O2Micro International has a beta of 0.07, suggesting that its stock price is 93% less volatile than the S&P 500.

Profitability

This table compares Microsemi Communications and O2Micro International’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Microsemi Communications -20.36% -69.40% -23.46%
O2Micro International -6.99% -4.05% -3.62%

Valuation and Earnings

This table compares Microsemi Communications and O2Micro International’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Microsemi Communications N/A N/A N/A ($0.28) -18.86
O2Micro International $56.56 million 0.75 -$2.98 million ($0.17) -9.76

Microsemi Communications has higher earnings, but lower revenue than O2Micro International. Microsemi Communications is trading at a lower price-to-earnings ratio than O2Micro International, indicating that it is currently the more affordable of the two stocks.

Summary

O2Micro International beats Microsemi Communications on 8 of the 9 factors compared between the two stocks.

Microsemi Communications Company Profile

Vitesse Semiconductor Corporation supplies high-performance integrated circuits used by manufacturers of networking systems for Carrier and Enterprise networking applications. The Company designs, develops and markets a diverse networking and connectivity IC solutions. The Company develops and manufactures variety of products that are marketed to Carrier and Enterprise networking, as well as data center infrastructure original equipment manufacturers. The Company’s product lines include Ethernet Switching Product Line that addresses Gigabit Ethernet and 10 Gigabit Ethernet applications in Carrier and Enterprise markets; Connectivity Product Line includes mixed-signal physical layer devices for connection of systems via optical fiber, copper cable, or backplanes and Transport Processing Product Line addresses the needs of Carrier network providers as they undergo a migration to new Ethernet packet-based networks.

O2Micro International Company Profile

O2Micro International Limited designs, develops and markets power management components for the Computer, Consumer, Industrial, Automotive and Communications markets. The Company’s power management products include integrated circuits (ICs) for liquid crystal display (LCD) and light emitting diode (LED) lighting; control and monitoring of battery charging and discharging; direct current (DC)/DC and alternating current (AC)/DC conversion, and provide select and switch functionality between power sources. It offers a range of products, including desktop and notebook monitors, portable media players, digital cameras, battery management systems for power tools, electric bikes, low emission vehicles (LEV) applications, industrial personal computers (PCs), portable media devices, smart phones, personal digital assistants (PDAs), global positioning system (GPS) units for navigational assistance in vehicles and electric and hybrid vehicle (EV/HEV) battery management.

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