Comparing ScanSource (NASDAQ:SCSC) & Methode Electronics (NYSE:MEI)

Methode Electronics (NYSE:MEI) and ScanSource (NASDAQ:SCSC) are both small-cap technology companies, but which is the superior business? We will compare the two companies based on the strength of their dividends, analyst recommendations, institutional ownership, risk, profitability, earnings and valuation.

Volatility and Risk

Methode Electronics has a beta of 1.57, indicating that its stock price is 57% more volatile than the S&P 500. Comparatively, ScanSource has a beta of 1.25, indicating that its stock price is 25% more volatile than the S&P 500.

Profitability

This table compares Methode Electronics and ScanSource’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Methode Electronics	-3.52%	-5.63%	-2.94%
ScanSource	2.44%	10.10%	5.11%

Insider and Institutional Ownership

95.5% of Methode Electronics shares are owned by institutional investors. Comparatively, 97.9% of ScanSource shares are owned by institutional investors. 1.9% of Methode Electronics shares are owned by company insiders. Comparatively, 3.2% of ScanSource shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company will outperform the market over the long term.

Analyst Recommendations

This is a summary of current ratings and recommmendations for Methode Electronics and ScanSource, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Methode Electronics	1	2	2	1	2.50
ScanSource	0	3	1	0	2.25

Methode Electronics presently has a consensus target price of $22.00, suggesting a potential upside of 46.22%. ScanSource has a consensus target price of $51.00, suggesting a potential downside of 10.12%. Given Methode Electronics’ stronger consensus rating and higher possible upside, equities research analysts clearly believe Methode Electronics is more favorable than ScanSource.

Valuation and Earnings

This table compares Methode Electronics and ScanSource”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Methode Electronics	$1.02 billion	0.53	-$35.70 million	($1.04)	-14.47
ScanSource	$3.23 billion	0.36	$78.87 million	$3.66	15.50

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

Summary

ScanSource beats Methode Electronics on 9 of the 15 factors compared between the two stocks.

About Methode Electronics

Methode Electronics, Inc. designs, engineers, and produces mechatronic products worldwide. It operates through four segments: Automotive, Industrial, Interface, and Medical. The Automotive segment supplies electronic and electro-mechanical devices, and related products to automobile original equipment manufacturers directly or through their tiered suppliers. Its products include integrated center consoles, hidden and ergonomic switches, transmission lead-frames, complex insert molded solutions, LED-based lighting solutions, and sensors, which incorporate magneto-elastic sensing, eddy current, or other sensing technologies that monitor the operation or status of a component or system. The Industrial segment manufactures external lighting solutions comprising driving, work, and signal lights; industrial safety radio remote controls; braided flexible cables; current-carrying laminated and powder-coated busbars; high-voltage high current connector and contracts; custom power-product assemblies, such as PowerRail solution; and high-current low-voltage flexible power cabling systems that are used in aerospace, cloud computing, commercial vehicles, construction equipment, industrial, military, power conversion, and transportation markets and applications. The Interface segment provides various copper-based transceivers and related accessories for the cloud computing hardware equipment and telecommunications broadband equipment markets; user interface solutions for the appliance, commercial food service, and point-of-sale equipment markets; and fluid-level sensors for the marine/recreational vehicle and sump pump markets. The Medical segment offers Dabir Surfaces, a surface support technology aimed at pressure injury prevention for use by patients who are immobilized or otherwise at risk for pressure injuries, including patients undergoing long-duration surgical procedures. Methode Electronics, Inc. was incorporated in 1946 and is headquartered in Chicago, Illinois.

About ScanSource

ScanSource, Inc. engages in the distribution of technology products and solutions in the United States, Canada, and Brazil. It operates through two segments, Specialty Technology Solutions and Modern Communications & Cloud. The Specialty Technology Solutions segment provides a portfolio of solutions primarily for enterprise mobile computing, data capture, barcode printing, point of sale (POS), payments, networking, electronic physical security, cyber security, and other technologies. This segment offers data capture and POS solutions to automate the collection, processing, and communication of information for commercial and industrial applications, including retail sales, distribution, shipping, inventory control, materials handling, warehouse management, and health care applications. It also provides electronic physical security products, such as identification, access control, video surveillance, and intrusion-related devices; networking products comprising wireless and networking infrastructure products; other software-as-a-service (SaaS) products; and engages in hardware rental activities. The Modern Communications & Cloud segment offers a portfolio of solutions primarily for communications technologies and services comprising voice, video conferencing, wireless, data networking, cybersecurity, cable, unified communications and collaboration, cloud, and technology services, as well as IP networks and other solutions for various vertical markets, such as education, healthcare, and government. The company serves manufacturing, warehouse and distribution, retail and e-commerce, hospitality, transportation and logistics, government, education and healthcare, and other industries. ScanSource, Inc. was incorporated in 1992 and is headquartered in Greenville, South Carolina.