Financial Analysis: Brocade Communications Systems (NASDAQ:BRCD) versus Inseego (INSG)

Inseego (NASDAQ: INSG) and Brocade Communications Systems (NASDAQ:BRCD) are both communications & networking – nec companies, but which is the superior business? We will contrast the two businesses based on the strength of their earnings, analyst recommendations, dividends, valuation, risk, profitability and institutional ownership.

Analyst Ratings

This is a breakdown of current ratings and price targets for Inseego and Brocade Communications Systems, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Inseego 0 1 1 0 2.50
Brocade Communications Systems 1 3 0 0 1.75

Inseego presently has a consensus price target of $1.88, suggesting a potential upside of 16.46%. Brocade Communications Systems has a consensus price target of $12.83, suggesting a potential upside of 0.81%. Given Inseego’s stronger consensus rating and higher possible upside, equities research analysts plainly believe Inseego is more favorable than Brocade Communications Systems.

Institutional & Insider Ownership

12.1% of Inseego shares are owned by institutional investors. Comparatively, 83.7% of Brocade Communications Systems shares are owned by institutional investors. 4.1% of Inseego shares are owned by company insiders. Comparatively, 1.8% of Brocade Communications Systems shares are owned 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.

Volatility and Risk

Inseego has a beta of 0.27, indicating that its stock price is 73% less volatile than the S&P 500. Comparatively, Brocade Communications Systems has a beta of 0.54, indicating that its stock price is 46% less volatile than the S&P 500.

Earnings & Valuation

This table compares Inseego and Brocade Communications Systems’ gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Inseego $243.55 million 0.39 -$60.57 million ($1.22) -1.32
Brocade Communications Systems $2.35 billion 2.25 $213.81 million $0.07 181.86

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

Profitability

This table compares Inseego and Brocade Communications Systems’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Inseego -30.71% N/A -24.17%
Brocade Communications Systems -3.56% -3.07% -1.62%

Dividends

Brocade Communications Systems pays an annual dividend of $0.22 per share and has a dividend yield of 1.7%. Inseego does not pay a dividend. Brocade Communications Systems pays out 314.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Summary

Brocade Communications Systems beats Inseego on 9 of the 15 factors compared between the two stocks.

About Inseego

Novatel Wireless, Inc. is a provider of intelligent wireless solutions for the mobile communications market. The Company’s range of products includes intelligent mobile hotspots, universal serial bus (USB) modems, embedded modules, integrated asset-management and mobile tracking machine-to-machine (M2M) devices, communications and applications software and cloud services. It operates in the wireless communications industry in two product categories: M2M Products and Solutions, and Mobile Computing Solutions. M2M Products and Solutions includes its M2M embedded modules, integrated M2M communications devices, Ctrack fleet management platform and its service delivery platforms, Crossroads, DMS, the N4A DM and N4A CMS that provide device management and service enablement. Mobile Computing Solutions includes its MiFi brand of intelligent mobile hotspot devices, USB modems and embedded modules that enable Internet access and data transmission and services via cellular wireless networks.

About Brocade Communications Systems

Brocade Communications Systems, Inc. (Brocade) is a supplier of networking hardware, software and services, including storage area networking (SAN) solutions and Internet protocol (IP) networking solutions for businesses and organizations of various types and sizes. The Company operates through three segments: SAN Products, IP Networking Products and Global Services. The SAN Products segment includes infrastructure products and solutions that help customers develop and deploy storage and server consolidation, disaster recovery and data security. The IP Networking Products segment includes Layer 2 and Layer 3 Ethernet switches, and routers to connect users over private and public networks. The Global Services segment includes break or fix maintenance, installation, consulting, network management and software maintenance, and post-contract customer support. Its products enable customers to deploy architectures and technologies, including virtualization and cloud computing.

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