Critical Review: Sequans Communications (NYSE:SQNS) & ARM (NASDAQ:ARM)

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

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Sequans Communications	138.26%	403.46%	31.37%
ARM	21.82%	11.94%	8.62%

Earnings & Valuation

This table compares Sequans Communications and ARM”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Sequans Communications	$33.62 million	1.98	-$40.99 million	$1.41	1.89
ARM	$3.23 billion	50.56	$306.00 million	$0.76	205.28

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

Volatility & Risk

Sequans Communications has a beta of 0.36, indicating that its share price is 64% less volatile than the S&P 500. Comparatively, ARM has a beta of 4.57, indicating that its share price is 357% more volatile than the S&P 500.

Insider & Institutional Ownership

63.3% of Sequans Communications shares are held by institutional investors. Comparatively, 7.5% of ARM shares are held by institutional investors. 9.4% of Sequans Communications shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company will outperform the market over the long term.

Analyst Recommendations

This is a breakdown of recent recommendations and price targets for Sequans Communications and ARM, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Sequans Communications	0	0	1	0	3.00
ARM	2	6	19	1	2.68

Sequans Communications presently has a consensus target price of $7.50, suggesting a potential upside of 181.43%. ARM has a consensus target price of $162.83, suggesting a potential upside of 4.37%. Given Sequans Communications’ stronger consensus rating and higher possible upside, equities analysts clearly believe Sequans Communications is more favorable than ARM.

Summary

Sequans Communications beats ARM on 8 of the 15 factors compared between the two stocks.

About Sequans Communications

Sequans Communications S.A. engages in the fabless designing, developing, and supplying of cellular semiconductor solutions for massive and broadband Internet of Things (IoT) markets in Taiwan, Korea, China, rest of Asia, Germany, the United States, and internationally. It offers baseband solutions for use in encoding and decoding data based on 4G and 5G protocols for wireless processing platform for a cellular device; RF transceivers used to transmit and receive wireless transmissions; highly integrated SoC solutions that combine various functions into a single die or package; and LTE modules. The company also provides software, including source code and tools to enable manufacturers to integrate their solutions into their devices; and design support services. The company serves OEMs and ODMs Customers, as well as 4G and 5G wireless carriers. Sequans Communications S.A. was incorporated in 2003 and is based in Paris, France.

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.