Critical Survey: Precision Optics (NASDAQ:POCI) & Outset Medical (NASDAQ:OM)

Outset Medical (NASDAQ:OM) and Precision Optics (NASDAQ:POCI) are both small-cap medical companies, but which is the better stock? We will compare the two businesses based on the strength of their valuation, earnings, analyst recommendations, institutional ownership, profitability, dividends and risk.

Analyst Ratings

This is a breakdown of recent recommendations for Outset Medical and Precision Optics, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Outset Medical	0	2	3	0	2.60
Precision Optics	0	0	0	0	N/A

Outset Medical currently has a consensus price target of $4.70, suggesting a potential upside of 677.50%. Given Outset Medical’s higher probable upside, equities research analysts clearly believe Outset Medical is more favorable than Precision Optics.

Institutional and Insider Ownership

13.7% of Precision Optics shares are held by institutional investors. 3.5% of Outset Medical shares are held by insiders. Comparatively, 16.3% of Precision Optics shares are held by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.

Profitability

This table compares Outset Medical and Precision Optics’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Outset Medical	-136.72%	-143.52%	-48.89%
Precision Optics	-15.45%	-26.62%	-16.41%

Earnings and Valuation

This table compares Outset Medical and Precision Optics”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Outset Medical	$130.38 million	0.24	-$172.80 million	($3.14)	-0.19
Precision Optics	$19.10 million	1.36	-$2.95 million	($0.28)	-15.32

Precision Optics has lower revenue, but higher earnings than Outset Medical. Precision Optics is trading at a lower price-to-earnings ratio than Outset Medical, indicating that it is currently the more affordable of the two stocks.

Volatility & Risk

Outset Medical has a beta of 1.94, indicating that its stock price is 94% more volatile than the S&P 500. Comparatively, Precision Optics has a beta of 0.16, indicating that its stock price is 84% less volatile than the S&P 500.

Summary

Precision Optics beats Outset Medical on 8 of the 13 factors compared between the two stocks.

About Outset Medical

Outset Medical, Inc., a medical technology company, engages in the development of a hemodialysis system for hemodialysis in the United States. The company offers Tablo Hemodialysis System, a compact console with integrated water purification, on-demand dialysate production, and software and connectivity capabilities for dialysis care in acute and home settings; and manufactures, supports, and distributes for Tablo console, Tablo cartridge, and other consumables. It also provides Tablo Data Ecosystem, including TabloHub, a customer-facing portal; MyTablo, a patient-facing portal; and TabloDash, an internal data analytics platform. The company was formerly known as Home Dialysis Plus, Ltd. and changed its name to Outset Medical, Inc. in January 2015. Outset Medical, Inc. was incorporated in 2003 and is headquartered in San Jose, California.

About Precision Optics

Precision Optics Corporation, Inc. designs, develops, manufactures, and sells specialized optical and illumination systems and related components primarily in the United States and the European Economic Area. It offers medical instrumentation products, including endoscopes and endocouplers, as well as other custom imaging and illumination products, such as Microprecision lenses and micro medical cameras, and 3D endoscopes for use in minimally invasive surgical procedures by hospitals and physicians. The company also provides components and assemblies for industrial and military use. It markets its products to medical device companies. The company was incorporated in 1982 and is based in Gardner, Massachusetts.