Reviewing ARM (NASDAQ:ARM) and Ambarella (NASDAQ:AMBA)

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

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Ambarella	-62.38%	-23.52%	-19.93%
ARM	21.82%	11.94%	8.62%

Valuation and Earnings

This table compares Ambarella and ARM”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Ambarella	$316.26 million	6.80	-$169.42 million	($2.49)	-20.37
ARM	$4.01 billion	35.83	$306.00 million	$0.75	180.73

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

Insider & Institutional Ownership

82.1% of Ambarella shares are held by institutional investors. Comparatively, 7.5% of ARM shares are held by institutional investors. 5.7% of Ambarella shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company is poised for long-term growth.

Volatility & Risk

Ambarella has a beta of 1.99, indicating that its stock price is 99% more volatile than the S&P 500. Comparatively, ARM has a beta of 4.08, indicating that its stock price is 308% more volatile than the S&P 500.

Analyst Ratings

This is a summary of recent ratings for Ambarella and ARM, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Ambarella	0	4	8	0	2.67
ARM	2	6	19	1	2.68

Ambarella presently has a consensus price target of $84.55, indicating a potential upside of 66.66%. ARM has a consensus price target of $152.76, indicating a potential upside of 12.70%. Given Ambarella’s higher probable upside, research analysts clearly believe Ambarella is more favorable than ARM.

Summary

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

About Ambarella

Ambarella, Inc. develops semiconductor solutions that enable high-definition (HD) and ultra HD compression, image signal processing, and artificial intelligence processing worldwide. The company's system-on-a-chip designs integrated HD video processing, image processing, artificial intelligence computer vision algorithms, audio processing, and system functions onto a single chip for delivering video and image quality, differentiated functionality, and low power consumption. Its solutions are used in automotive cameras, such as automotive video recorders, electronic mirrors, front advanced driver assistance system camera, cabin monitoring system and driver monitoring system camera, and central domain controllers for autonomous vehicle; enterprise and public class, and home security camera; and robotics and industrial application, including identification/authentication cameras, robotic products, and sensing cameras, as well as cameras for the enterprise, home, public spaces, and consumer leisure comprising wearable body cameras, sports action cameras, social media cameras, drones for capturing aerial video or photographs, video conferencing, and virtual reality applications. The company sells its solutions to original design manufacturers and original equipment manufacturers through its direct sales force and distributors. Ambarella, Inc. was incorporated in 2004 and is headquartered in Santa Clara, California.

About ARM

Arm Holdings Plc engages in the licensing, marketing, research, and development of microprocessors, systems IP, graphics processing units, physical IP and associated systems IP, software, and tools. It operates through the following geographical segments: United Kingdom, United States, and Other Countries. The company was founded on November 12, 1990 and is headquartered in Cambridge, the United Kingdom.