Reviewing Tower Semiconductor (TSEM) and NeoPhotonics (NPTN)

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Tower Semiconductor (NYSE: NPTN) and NeoPhotonics (NYSE:NPTN) are both small-cap computer and technology companies, but which is the better business? We will contrast the two companies based on the strength of their profitability, institutional ownership, analyst recommendations, risk, dividends, earnings and valuation.

Analyst Ratings

This is a breakdown of recent ratings and target prices for Tower Semiconductor and NeoPhotonics, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Tower Semiconductor 0 0 5 0 3.00
NeoPhotonics 0 4 5 1 2.70

Tower Semiconductor presently has a consensus price target of $35.50, suggesting a potential upside of 78.57%. NeoPhotonics has a consensus price target of $9.56, suggesting a potential upside of 12.90%. Given Tower Semiconductor’s stronger consensus rating and higher probable upside, equities research analysts plainly believe Tower Semiconductor is more favorable than NeoPhotonics.

Volatility & Risk

Tower Semiconductor has a beta of 1.12, indicating that its stock price is 12% more volatile than the S&P 500. Comparatively, NeoPhotonics has a beta of 1.19, indicating that its stock price is 19% more volatile than the S&P 500.

Profitability

This table compares Tower Semiconductor and NeoPhotonics’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Tower Semiconductor 19.58% 19.19% 11.65%
NeoPhotonics -20.58% -28.35% -13.70%

Earnings and Valuation

This table compares Tower Semiconductor and NeoPhotonics’ revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Tower Semiconductor $1.39 billion 1.41 $298.01 million $2.21 9.00
NeoPhotonics $292.89 million 1.31 -$53.33 million ($1.10) -7.70

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

Insider & Institutional Ownership

46.2% of Tower Semiconductor shares are held by institutional investors. Comparatively, 82.3% of NeoPhotonics shares are held by institutional investors. 1.0% of Tower Semiconductor shares are held by insiders. Comparatively, 16.7% of NeoPhotonics shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Summary

Tower Semiconductor beats NeoPhotonics on 10 of the 14 factors compared between the two stocks.

About Tower Semiconductor

Tower Semiconductor Ltd., an independent semiconductor foundry, manufactures and markets analog intensive mixed-signal semiconductor devices in the United States, Japan, Asia, and Europe. The company provides various customizable process technologies, including SiGe, BiCMOS, mixed-signal/CMOS, RF CMOS, CMOS image sensor, integrated power management, and MEMS. It also offers transfer optimization and development process services to integrated device manufacturers and fabless companies. The company serves various markets, such as automotive, medical, industrial, consumer, aerospace and defense, and others. Tower Semiconductor Ltd. was founded in 1993 and is headquartered in Migdal Haemek, Israel.

About NeoPhotonics

NeoPhotonics Corporation develops, manufactures, and sells optoelectronic products that transmit, receive, and switch high speed digital optical signals for communications networks. It offers high speed products, including transmitter, receiver, and switching products for 100G (gigabits per second) and optical transmission applications over distances of 2 to 2,000 kilometers; optical components for coherent systems, including narrow linewidth tunable transmit and local oscillator lasers (NLW-ITLA) that generate ultra-pure wavelength or color for coherent transmission, as well as coherent micro-modulators, which encode the information on the intensity and phase of the optical beam; and integrated coherent receivers (ICRs) that decode the phase and polarization encoded coherent signals. The company also engages in developing pluggable coherent modules that combine NLW-ITLA with ICR and a coherent modulator; and offers 100G products for the client side and datacenter applications. In addition, it offers network products and solutions, including application-specific passive optical functionalities in modules or sub-system configurations; transceiver modules for various low speed access and mobile backhaul applications; and products for test and measurement, instrumentation, industrial, and research applications. The company sells its products to network equipment manufacturers through a direct sales force in North America, Europe, Russia, Asia, and internationally. The company was formerly known as NanoGram Corporation and changed its name to NeoPhotonics Corporation in 2002. NeoPhotonics Corporation was founded in 1996 and is headquartered in San Jose, California.

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