Critical Contrast: ARM (NASDAQ:ARM) & MaxLinear (NASDAQ:MXL)

MaxLinear (NASDAQ:MXL) and ARM (NASDAQ:ARM) are both computer and technology companies, but which is the superior investment? We will contrast the two businesses based on the strength of their institutional ownership, risk, analyst recommendations, profitability, earnings, dividends and valuation.

Volatility and Risk

MaxLinear has a beta of 1.77, indicating that its stock price is 77% more volatile than the S&P 500. Comparatively, ARM has a beta of 4.57, indicating that its stock price is 357% more volatile than the S&P 500.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
MaxLinear	-68.01%	-21.94%	-13.58%
ARM	21.82%	11.94%	8.62%

Analyst Ratings

This is a breakdown of recent ratings and price targets for MaxLinear and ARM, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
MaxLinear	0	3	4	0	2.57
ARM	2	6	19	1	2.68

MaxLinear currently has a consensus target price of $25.50, indicating a potential upside of 57.31%. ARM has a consensus target price of $162.83, indicating a potential upside of 2.06%. Given MaxLinear’s higher possible upside, analysts clearly believe MaxLinear is more favorable than ARM.

Valuation and Earnings

This table compares MaxLinear and ARM”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
MaxLinear	$360.53 million	3.81	-$245.20 million	($2.93)	-5.53
ARM	$3.23 billion	51.71	$306.00 million	$0.76	209.92

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

Insider and Institutional Ownership

90.8% of MaxLinear shares are owned by institutional investors. Comparatively, 7.5% of ARM shares are owned by institutional investors. 8.6% of MaxLinear shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock will outperform the market over the long term.

Summary

ARM beats MaxLinear on 12 of the 15 factors compared between the two stocks.

About MaxLinear

MaxLinear, Inc. provides communications systems-on-chip solutions worldwide. Its products integrate various portions of a high-speed communication system, including radio frequency, high-performance analog, mixed-signal, digital signal processing, security engines, data compression and networking layers, and power management. The company's products are used in various electronic devices, such as radio transceivers and modems for 4G/5G base-station and backhaul infrastructure; optical transceivers targeting hyperscale data centers; Wi-Fi and wireline routers for home networking; broadband modems compliant with data over cable service interface specifications, passive optical fiber standards, and digital subscriber line, as well as power management and interface products. It serves electronics distributors, module makers, original equipment manufacturers, and original design manufacturers through a direct sales force, third-party sales representatives, and a network of distributors. The company was incorporated in 2003 and is headquartered in Carlsbad, California.

About ARM

Arm Holdings plc architects, develops, and licenses central processing unit products and related technologies for semiconductor companies and original equipment manufacturers rely on to develop products. It offers microprocessors, systems intellectual property (IPs), graphics processing units, physical IP and associated systems IPs, software, tools, and other related services. Its products are used in various markets, such as automotive, computing infrastructure, consumer technologies, and Internet of things. The company operates in the United States, the People's Republic of China, Taiwan, South Korea, and internationally. The company was founded in 1990 and is headquartered in Cambridge, the United Kingdom. Arm Holdings plc operates as a subsidiary of Kronos II LLC.