Analyzing Allegro MicroSystems (NASDAQ:ALGM) & Sono-Tek (NASDAQ:SOTK)

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

Insider and Institutional Ownership

56.5% of Allegro MicroSystems shares are owned by institutional investors. Comparatively, 47.9% of Sono-Tek shares are owned by institutional investors. 0.4% of Allegro MicroSystems shares are owned by insiders. Comparatively, 5.5% of Sono-Tek shares are owned by 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.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Allegro MicroSystems	-1.67%	6.09%	4.11%
Sono-Tek	8.64%	9.52%	7.45%

Analyst Ratings

This is a summary of current recommendations and price targets for Allegro MicroSystems and Sono-Tek, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Allegro MicroSystems	1	1	10	0	2.75
Sono-Tek	0	2	0	0	2.00

Allegro MicroSystems presently has a consensus target price of $51.80, suggesting a potential downside of 12.20%. Sono-Tek has a consensus target price of $8.50, suggesting a potential upside of 60.68%. Given Sono-Tek’s higher possible upside, analysts clearly believe Sono-Tek is more favorable than Allegro MicroSystems.

Risk & Volatility

Allegro MicroSystems has a beta of 1.98, indicating that its share price is 98% more volatile than the S&P 500. Comparatively, Sono-Tek has a beta of -0.03, indicating that its share price is 103% less volatile than the S&P 500.

Valuation & Earnings

This table compares Allegro MicroSystems and Sono-Tek”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	12.34	-$14.90 million	($0.09)	-655.56
Sono-Tek	$20.91 million	3.97	$1.81 million	$0.11	48.09

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

Summary

Sono-Tek beats Allegro MicroSystems on 8 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 Sono-Tek

Sono-Tek Corporation designs and manufactures ultrasonic coating systems for applying on parts and components for the microelectronics/electronics, alternative energy, medical, industrial, and research and development/other markets worldwide. The company also designs and manufactures custom-engineered ultrasonic coating systems; and provides nozzles and generators for manufacturers' equipment. Its products include integrated multi-axis coating systems, integrated coating systems, fluxing systems, OEM systems, and other related systems. In addition, the company provides surface coating solutions and application consulting services. It markets and distributes its products through direct sales personnel, select independent distributors, and sales representatives. The company was incorporated in 1975 and is based in Milton, New York.