Critical Survey: Netlist (OTCMKTS:NLST) versus Allegro MicroSystems (NASDAQ:ALGM)

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

Analyst Recommendations

This is a summary of recent recommendations and price targets for Allegro MicroSystems and Netlist, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Allegro MicroSystems	0	1	10	0	2.91
Netlist	0	0	1	0	3.00

Allegro MicroSystems presently has a consensus price target of $30.91, indicating a potential upside of 24.43%. Netlist has a consensus price target of $2.00, indicating a potential upside of 170.45%. Given Netlist’s stronger consensus rating and higher possible upside, analysts plainly believe Netlist is more favorable than Allegro MicroSystems.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Allegro MicroSystems	-2.96%	8.48%	6.09%
Netlist	-37.19%	-852.20%	-94.11%

Institutional and Insider Ownership

56.5% of Allegro MicroSystems shares are owned by institutional investors. Comparatively, 0.0% of Netlist shares are owned by institutional investors. 0.5% of Allegro MicroSystems shares are owned by company insiders. Comparatively, 2.7% of Netlist shares are owned by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock is poised for long-term growth.

Earnings & Valuation

This table compares Allegro MicroSystems and Netlist”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Allegro MicroSystems	$1.05 billion	4.36	$152.70 million	($0.14)	-177.42
Netlist	$69.21 million	2.91	-$60.40 million	($0.22)	-3.36

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

Risk and Volatility

Allegro MicroSystems has a beta of 1.65, suggesting that its share price is 65% more volatile than the S&P 500. Comparatively, Netlist has a beta of 1.11, suggesting that its share price is 11% more volatile than the S&P 500.

Summary

Allegro MicroSystems beats Netlist 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 Netlist

Netlist, Inc. designs, manufactures, and markets memory subsystems for the server, high-performance computing, and communications markets in the United States and internationally. The company portfolio of proprietary technologies and design techniques, includes efficient planar design, alternative packaging techniques, and custom semiconductor logic, to deliver memory subsystems; and sells specialty memory modules and flash-based products for use in data center and industrial applications. It resells component products, including solid state drive (SSD), NAND flash, and dual inline memory module (DIMM) to storage customers, appliance customers, system builders, and cloud and datacenter customers; and sells component inventory to distributors and other users of memory integrated circuits. The company markets and sells its products through a direct sales force and a network of independent sales representatives. Netlist, Inc. was incorporated in 2000 and is headquartered in Irvine, California.