Critical Review: Netgear (NTGR) & Westell (WSTL)

Netgear (NASDAQ: NTGR) and Westell (NASDAQ:WSTL) are both small-cap computer and technology companies, but which is the superior investment? We will contrast the two businesses based on the strength of their analyst recommendations, dividends, profitability, earnings, institutional ownership, valuation and risk.

Volatility and Risk

Netgear has a beta of 1.94, indicating that its share price is 94% more volatile than the S&P 500. Comparatively, Westell has a beta of 1.45, indicating that its share price is 45% more volatile than the S&P 500.

Profitability

This table compares Netgear and Westell’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Netgear 0.63% 9.63% 6.23%
Westell 0.62% 7.42% 6.11%

Institutional and Insider Ownership

97.5% of Netgear shares are owned by institutional investors. Comparatively, 29.0% of Westell shares are owned by institutional investors. 5.1% of Netgear shares are owned by insiders. Comparatively, 24.2% of Westell shares are owned 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.

Valuation and Earnings

This table compares Netgear and Westell’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Netgear $1.41 billion 1.34 $19.43 million $2.32 25.78
Westell $62.97 million 0.75 -$15.94 million ($0.32) -9.50

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

Analyst Ratings

This is a summary of recent ratings and price targets for Netgear and Westell, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Netgear 0 0 4 0 3.00
Westell 0 0 1 0 3.00

Netgear currently has a consensus target price of $74.50, suggesting a potential upside of 24.58%. Westell has a consensus target price of $6.00, suggesting a potential upside of 97.37%. Given Westell’s higher possible upside, analysts plainly believe Westell is more favorable than Netgear.

Summary

Netgear beats Westell on 11 of the 13 factors compared between the two stocks.

Netgear Company Profile

NETGEAR, Inc. designs, develops, and markets networking and Internet connected products for consumers, businesses, and service providers. The company operates in three segments: Arlo, Connected Home, and Small and Medium Business. It offers smart home/connected home/broadband access products, such as remote video security systems, broadband modems, WiFi gateways, WiFi hotspots, WiFi routers and home WiFi systems, WiFi range extenders, Powerline adapters and bridges, and WiFi network adapters. The company also provides Ethernet switches, wireless controllers and access points, unified storage products, and Internet security appliances for small and medium-sized businesses. It markets and sells its products through traditional retailers, online retailers, wholesale distributors, direct market resellers, value-added resellers, and broadband service providers in the Americas, Europe, the Middle-East, Africa, and the Asia Pacific. NETGEAR, Inc. was founded in 1996 and is headquartered in San Jose, California.

Westell Company Profile

Westell Technologies, Inc., through its subsidiary, Westell, Inc., designs and distributes telecommunications products to telephone companies in the United States. The company operates through three segments: In-Building Wireless (IBW), Intelligent Site Management and Services (ISMS), and Communications Network Solutions (CNS). The IBW segment offers distributed antenna systems conditioners; repeaters; battery backup units; and system components and antennas, including couplers, duplexers, splitters, filters, and tappers for commercial and public safety in-building wireless systems. The ISMS segment provides a suite of remote units, which provide machine-to-machine communications that enable operators to remotely monitor, manage, and control site infrastructure and support systems. The CNS segment provides a range of outdoor network infrastructure, such as integrated cabinets, power distribution products, copper and fiber connectivity panels, T1 network interface units, and tower mounted amplifiers. The company serves wireless and wireline service providers, multiple systems operators, Internet service providers, systems integrators, neutral host operators, and distributors through field sales organization, distributors, and partners. Westell Technologies, Inc. was founded in 1980 and is headquartered in Aurora, Illinois.

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