Analog Devices (NASDAQ:ADI) versus Allegro MicroSystems (NASDAQ:ALGM) Critical Analysis

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

Profitability

This table compares Allegro MicroSystems and Analog Devices’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Allegro MicroSystems	3.07%	10.34%	7.06%
Analog Devices	29.79%	16.39%	11.49%

Risk and Volatility

Allegro MicroSystems has a beta of 2.05, meaning that its share price is 105% more volatile than the S&P 500. Comparatively, Analog Devices has a beta of 1.24, meaning that its share price is 24% more volatile than the S&P 500.

Analyst Recommendations

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

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Allegro MicroSystems	1	1	10	1	2.85
Analog Devices	0	3	29	1	2.94

Allegro MicroSystems currently has a consensus target price of $48.75, indicating a potential upside of 51.09%. Analog Devices has a consensus target price of $460.55, indicating a potential upside of 8.75%. Given Allegro MicroSystems’ higher possible upside, equities analysts plainly believe Allegro MicroSystems is more favorable than Analog Devices.

Earnings & Valuation

This table compares Allegro MicroSystems and Analog Devices”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Allegro MicroSystems	$890.10 million	6.76	-$14.90 million	$0.15	215.11
Analog Devices	$11.02 billion	18.62	$2.27 billion	$8.43	50.24

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

Insider and Institutional Ownership

56.5% of Allegro MicroSystems shares are held by institutional investors. Comparatively, 86.8% of Analog Devices shares are held by institutional investors. 0.5% of Allegro MicroSystems shares are held by insiders. Comparatively, 0.4% of Analog Devices shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Summary

Analog Devices beats Allegro MicroSystems on 10 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 Analog Devices

Analog Devices, Inc. designs, manufactures, tests, and markets integrated circuits (ICs), software, and subsystems products in the United States, rest of North and South America, Europe, Japan, China, and rest of Asia. The company provides data converter products, which translate real-world analog signals into digital data, as well as translates digital data into analog signals; power management and reference products for power conversion, driver monitoring, sequencing, and energy management applications in the automotive, communications, industrial, and consumer markets; and power ICs that include performance, integration, and software design simulation tools for accurate power supply designs. It also offers amplifiers to condition analog signals; and radio frequency and microwave ICs to support cellular infrastructure; and micro-electro-mechanical systems technology solutions, including accelerometers used to sense acceleration, gyroscopes for sense rotation, inertial measurement units to sense multiple degrees of freedom, and broadband switches for radio and instrument systems, as well as isolators. In addition, the company provides digital signal processing and system products for numeric calculations. It serves clients in the industrial, automotive, consumer, instrumentation, aerospace, defense and healthcare, and communications markets through a direct sales force, third-party distributors, and independent sales representatives, as well as online. Analog Devices, Inc. was incorporated in 1965 and is headquartered in Wilmington, Massachusetts.