Financial Analysis: Extreme Networks (NASDAQ:EXTR) & Applied Optoelectronics (NASDAQ:AAOI)

Applied Optoelectronics (NASDAQ:AAOI) and Extreme Networks (NASDAQ:EXTR) are both mid-cap technology companies, but which is the better business? We will compare the two businesses based on the strength of their dividends, profitability, valuation, analyst recommendations, institutional ownership, earnings and risk.

Risk and Volatility

Applied Optoelectronics has a beta of 3.79, indicating that its share price is 279% more volatile than the S&P 500. Comparatively, Extreme Networks has a beta of 1.76, indicating that its share price is 76% more volatile than the S&P 500.

Institutional & Insider Ownership

61.7% of Applied Optoelectronics shares are owned by institutional investors. Comparatively, 91.1% of Extreme Networks shares are owned by institutional investors. 3.8% of Applied Optoelectronics shares are owned by company insiders. Comparatively, 3.6% of Extreme Networks 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.

Analyst Recommendations

This is a breakdown of current recommendations for Applied Optoelectronics and Extreme Networks, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Applied Optoelectronics	1	2	3	0	2.33
Extreme Networks	0	2	7	0	2.78

Applied Optoelectronics currently has a consensus price target of $139.40, suggesting a potential upside of 40.63%. Extreme Networks has a consensus price target of $32.25, suggesting a potential upside of 49.92%. Given Extreme Networks’ stronger consensus rating and higher probable upside, analysts plainly believe Extreme Networks is more favorable than Applied Optoelectronics.

Profitability

This table compares Applied Optoelectronics and Extreme Networks’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Applied Optoelectronics	-9.57%	-1.98%	-1.34%
Extreme Networks	3.28%	88.88%	6.32%

Earnings and Valuation

This table compares Applied Optoelectronics and Extreme Networks”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Applied Optoelectronics	$455.71 million	18.40	-$38.23 million	($0.78)	-127.08
Extreme Networks	$1.28 billion	2.21	$42.12 million	$0.31	69.39

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

Summary

Extreme Networks beats Applied Optoelectronics on 11 of the 14 factors compared between the two stocks.

About Applied Optoelectronics

Applied Optoelectronics, Inc. designs, manufactures, and sells fiber-optic networking products in the United States, Taiwan, and China. It offers optical modules, optical filters, lasers, laser components, subassemblies, transmitters and transceivers, turn-key equipment, headend, node, distribution equipment, and amplifiers. The company sells its products to internet data center operators, cable television, telecom equipment manufacturers, fiber-to-the-home, and internet service providers through its direct and indirect sales channels. Applied Optoelectronics, Inc. was incorporated in 1997 and is headquartered in Sugar Land, Texas.

About Extreme Networks

Extreme Networks, Inc. delivers cloud-driven networking solutions that leverage the powers of machine learning, artificial intelligence, analytics, and automation.
The company designs, develops, and manufactures wired and wireless network infrastructure equipment and develops the software for network management, policy, analytics, security, and access controls. Over 50,000 customers globally trust their end-to-end, cloud-driven networking solutions and rely on our top-rated services and support to accelerate their digital transformation efforts.