Critical Analysis: Skyworks Solutions (NASDAQ:SWKS) versus Ambarella (NASDAQ:AMBA)

Skyworks Solutions (NASDAQ:SWKS) and Ambarella (NASDAQ:AMBA) are both computer and technology companies, but which is the better investment? We will contrast the two businesses based on the strength of their dividends, profitability, institutional ownership, earnings, valuation, risk and analyst recommendations.

Analyst Ratings

This is a summary of recent ratings for Skyworks Solutions and Ambarella, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Skyworks Solutions	3	19	1	0	1.91
Ambarella	0	4	8	0	2.67

Skyworks Solutions presently has a consensus price target of $83.78, indicating a potential upside of 30.66%. Ambarella has a consensus price target of $86.67, indicating a potential upside of 71.24%. Given Ambarella’s stronger consensus rating and higher probable upside, analysts clearly believe Ambarella is more favorable than Skyworks Solutions.

Profitability

This table compares Skyworks Solutions and Ambarella’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Skyworks Solutions	13.02%	12.60%	9.67%
Ambarella	-62.38%	-23.52%	-19.93%

Insider & Institutional Ownership

85.4% of Skyworks Solutions shares are held by institutional investors. Comparatively, 82.1% of Ambarella shares are held by institutional investors. 0.3% of Skyworks Solutions shares are held by company insiders. Comparatively, 5.7% of Ambarella shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Risk and Volatility

Skyworks Solutions has a beta of 1.18, indicating that its stock price is 18% more volatile than the S&P 500. Comparatively, Ambarella has a beta of 1.78, indicating that its stock price is 78% more volatile than the S&P 500.

Valuation and Earnings

This table compares Skyworks Solutions and Ambarella”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Skyworks Solutions	$4.05 billion	2.55	$596.00 million	$3.26	19.67
Ambarella	$284.87 million	7.41	-$169.42 million	($2.84)	-17.82

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

Summary

Skyworks Solutions beats Ambarella on 8 of the 14 factors compared between the two stocks.

About Skyworks Solutions

Skyworks Solutions, Inc., together with its subsidiaries, designs, develops, manufactures, and markets proprietary semiconductor products in the United States, China, South Korea, Taiwan, Europe, the Middle East, Africa, and the rest of Asia-Pacific. Its product portfolio includes amplifiers, antenna tuners, attenuators, automotive tuners and digital radios, DC/DC converters, demodulators, detectors, diodes, wireless analog system on chip products, directional couplers, diversity receive modules, filters, front-end modules, hybrids, light emitting diode drivers, low noise amplifiers, mixers, modulators, optocouplers/optoisolators, phase locked loops, phase shifters, power dividers/combiners, power over ethernet, power isolators, receivers, switches, synthesizers, timing devices, voltage controlled oscillators/synthesizers, and voltage regulators. The company products are the used in aerospace, automotive, broadband, cellular infrastructure, connected home, defense, entertainment and gaming, industrial, medical, military, smartphone, tablet, and wearable markets. It sells its products through direct sales force, electronic component distributors, and independent sales representatives. Skyworks Solutions, Inc. was founded in 1962 and is based in Irvine, California.

About Ambarella

Ambarella, Inc. develops semiconductor solutions that enable high-definition (HD) and ultra HD compression, image signal processing, and artificial intelligence processing worldwide. The company's system-on-a-chip designs integrated HD video processing, image processing, artificial intelligence computer vision algorithms, audio processing, and system functions onto a single chip for delivering video and image quality, differentiated functionality, and low power consumption. Its solutions are used in automotive cameras, such as automotive video recorders, electronic mirrors, front advanced driver assistance system camera, cabin monitoring system and driver monitoring system camera, and central domain controllers for autonomous vehicle; enterprise and public class, and home security camera; and robotics and industrial application, including identification/authentication cameras, robotic products, and sensing cameras, as well as cameras for the enterprise, home, public spaces, and consumer leisure comprising wearable body cameras, sports action cameras, social media cameras, drones for capturing aerial video or photographs, video conferencing, and virtual reality applications. The company sells its solutions to original design manufacturers and original equipment manufacturers through its direct sales force and distributors. Ambarella, Inc. was incorporated in 2004 and is headquartered in Santa Clara, California.