Digirad (NASDAQ: DRAD) and IRIDEX (NASDAQ:IRIX) are both small-cap medical companies, but which is the better investment? We will compare the two businesses based on the strength of their risk, dividends, profitability, earnings, analyst recommendations, institutional ownership and valuation.

Dividends

Digirad pays an annual dividend of $0.22 per share and has a dividend yield of 9.2%. IRIDEX does not pay a dividend. Digirad pays out -37.9% of its earnings in the form of a dividend.

Profitability

This table compares Digirad and IRIDEX’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Digirad -9.93% 9.82% 6.02%
IRIDEX -42.22% -23.21% -19.03%

Institutional and Insider Ownership

53.1% of Digirad shares are held by institutional investors. Comparatively, 49.3% of IRIDEX shares are held by institutional investors. 11.9% of Digirad shares are held by company insiders. Comparatively, 5.0% of IRIDEX shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Earnings & Valuation

This table compares Digirad and IRIDEX’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Digirad $125.47 million 0.38 $14.30 million ($0.58) -4.14
IRIDEX $46.16 million 1.99 -$11.71 million ($1.71) -4.65

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

Volatility and Risk

Digirad has a beta of 1.89, indicating that its stock price is 89% more volatile than the S&P 500. Comparatively, IRIDEX has a beta of 1.31, indicating that its stock price is 31% more volatile than the S&P 500.

Analyst Recommendations

This is a summary of recent ratings and price targets for Digirad and IRIDEX, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Digirad 0 0 1 0 3.00
IRIDEX 0 0 1 0 3.00

Digirad presently has a consensus target price of $6.00, suggesting a potential upside of 150.00%. IRIDEX has a consensus target price of $13.00, suggesting a potential upside of 63.52%. Given Digirad’s higher probable upside, research analysts plainly believe Digirad is more favorable than IRIDEX.

Summary

Digirad beats IRIDEX on 12 of the 13 factors compared between the two stocks.

About Digirad

Digirad Corporation provides healthcare solutions. The Company’s segments include Diagnostic Services, Mobile Healthcare, Diagnostic Imaging and Medical Device Sales and Services. Through Diagnostic Services, the Company offers an imaging services program as an alternative to purchasing equipment or outsourcing the procedures to another physician or imaging center. Through Mobile Healthcare segment, the Company provides contract sales services and diagnostic imaging services. Through Diagnostic Imaging segment, the Company sells its internally developed solid-state gamma camera imaging systems and camera maintenance contracts. Through Medical Device Sales and Services segment, the Company provides contract sales services, as well as warranty and post-warranty services, under contract with Philips Healthcare within a defined region in the upper Midwest region of the United States.

About IRIDEX

IRIDEX Corporation is a provider of therapeutic based laser consoles, delivery devices and consumable instrumentation used to treat sight-threatening eye diseases in ophthalmology. The Company operates through ophthalmology segment. Its ophthalmology products consist of laser consoles, delivery devices and consumable instrumentation, including laser probes, and are used in the treatment of serious eye diseases, including the over three causes of irreversible blindness, such as diabetic retinopathy, glaucoma and age-related macular degeneration (AMD). In addition, the Company’s ophthalmology products are often used in vitrectomy procedures (used to treat proliferative diabetic retinopathy, macular holes, retinal tears and detachments), which are generally performed in the operating room and require a consumable single use intraocular laser probe (EndoProbe) to deliver light to the back of the eye together with other instrumentation.

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