Comparing Allegro MicroSystems (NASDAQ:ALGM) & ARM (NASDAQ:ARM)

Allegro MicroSystems (NASDAQ:ALGM) and ARM (NASDAQ:ARM) are both technology companies, but which is the better stock? We will contrast the two businesses based on the strength of their risk, valuation, analyst recommendations, profitability, earnings, dividends and institutional ownership.

Institutional & Insider Ownership

56.5% of Allegro MicroSystems shares are owned by institutional investors. Comparatively, 7.5% of ARM shares are owned by institutional investors. 0.5% of Allegro MicroSystems shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock will outperform the market over the long term.

Volatility and Risk

Allegro MicroSystems has a beta of 1.94, suggesting that its share price is 94% more volatile than the S&P 500. Comparatively, ARM has a beta of 3.91, suggesting that its share price is 291% more volatile than the S&P 500.

Profitability

This table compares Allegro MicroSystems and ARM’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Allegro MicroSystems	1.50%	8.30%	5.65%
ARM	20.25%	12.24%	9.41%

Analyst Ratings

This is a breakdown of current ratings and target prices for Allegro MicroSystems and ARM, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Allegro MicroSystems	1	2	9	0	2.67
ARM	1	7	18	0	2.65

Allegro MicroSystems presently has a consensus price target of $52.80, suggesting a potential upside of 20.63%. ARM has a consensus price target of $285.33, suggesting a potential upside of 0.98%. Given Allegro MicroSystems’ stronger consensus rating and higher possible upside, equities analysts plainly believe Allegro MicroSystems is more favorable than ARM.

Valuation and Earnings

This table compares Allegro MicroSystems and ARM”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Allegro MicroSystems	$890.10 million	9.17	-$14.90 million	$0.06	729.50
ARM	$4.92 billion	61.34	$904.00 million	$0.97	291.31

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

Summary

ARM beats Allegro MicroSystems on 9 of the 14 factors compared between the two stocks.

About Allegro MicroSystems

Allegro MicroSystems, Inc., together with its subsidiaries, designs, develops, manufactures, and markets sensor integrated circuits (ICs) and application-specific analog power ICs for motion control and energy-efficient systems. Its products include magnetic sensor ICs, such as position, speed, and current sensor ICs; and power ICs comprising motor driver ICs, regulator and LED driver ICs, and isolated gate drivers. The company sells its products to original equipment manufacturers and distributors primarily in the automotive and industrial markets through its direct sales force, third party distributors, independent sales representatives, and consignment. It operates in the United States, rest of the Americas, Europe, Japan, Greater China, South Korea, and other Asian markets. The company was founded in 1990 and is headquartered in Manchester, New Hampshire. Allegro MicroSystems, Inc. is a subsidiary of Sanken Electric Co., Ltd.

About ARM

Arm Holdings Plc engages in the licensing, marketing, research, and development of microprocessors, systems IP, graphics processing units, physical IP and associated systems IP, software, and tools. It operates through the following geographical segments: United Kingdom, United States, and Other Countries. The company was founded on November 12, 1990 and is headquartered in Cambridge, the United Kingdom.