Critical Analysis: Broadcom (NASDAQ:AVGO) vs. Onto Innovation (NYSE:ONTO)

Onto Innovation (NYSE:ONTO) and Broadcom (NASDAQ:AVGO) are both large-cap technology companies, but which is the superior business? We will contrast the two companies based on the strength of their valuation, earnings, profitability, analyst recommendations, risk, institutional ownership and dividends.

Analyst Recommendations

This is a breakdown of recent ratings and price targets for Onto Innovation and Broadcom, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Onto Innovation	0	1	10	2	3.08
Broadcom	0	4	29	0	2.88

Onto Innovation currently has a consensus price target of $380.30, suggesting a potential upside of 30.38%. Broadcom has a consensus price target of $491.97, suggesting a potential upside of 38.35%. Given Broadcom’s higher probable upside, analysts plainly believe Broadcom is more favorable than Onto Innovation.

Volatility & Risk

Onto Innovation has a beta of 1.59, meaning that its share price is 59% more volatile than the S&P 500. Comparatively, Broadcom has a beta of 1.45, meaning that its share price is 45% more volatile than the S&P 500.

Insider and Institutional Ownership

98.3% of Onto Innovation shares are owned by institutional investors. Comparatively, 76.4% of Broadcom shares are owned by institutional investors. 0.5% of Onto Innovation shares are owned by company insiders. Comparatively, 1.9% of Broadcom shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock will outperform the market over the long term.

Profitability

This table compares Onto Innovation and Broadcom’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Onto Innovation	11.84%	13.44%	10.30%
Broadcom	38.85%	41.61%	19.55%

Valuation and Earnings

This table compares Onto Innovation and Broadcom”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Onto Innovation	$1.01 billion	14.24	$136.76 million	$2.66	109.66
Broadcom	$63.89 billion	26.48	$23.13 billion	$6.00	59.26

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

Summary

Broadcom beats Onto Innovation on 10 of the 15 factors compared between the two stocks.

About Onto Innovation

Onto Innovation Inc. engages in the design, development, manufacture, and support of process control tools that performs optical metrology. The company offers lithography systems and process control analytical software. It also offers process and yield management solutions, and device packaging and test facilities through standalone systems for optical metrology, macro-defect inspection, packaging lithography, and transparent and opaque thin film measurements. In addition, the company provides process control software portfolio that includes solutions for standalone tools, groups of tools, and enterprise-or factory-wide suites. Further, it engages in systems software, spare parts, and other services, as well as offers software licensing services. The company's products are used in semiconductor and advanced packaging device manufacturers; silicon wafer; light emitting diode; vertical-cavity surface-emitting laser; micro-electromechanical system; CMOS image sensor; power device; analog device; RF filter; data storage; and various industrial and scientific applications. Onto Innovation Inc. was founded in 1940 and is headquartered in Wilmington, Massachusetts.

About Broadcom

Broadcom Inc. designs, develops, and supplies various semiconductor devices with a focus on complex digital and mixed signal complementary metal oxide semiconductor based devices and analog III-V based products worldwide. The company operates in two segments, Semiconductor Solutions and Infrastructure Software. It provides set-top box system-on-chips (SoCs); cable, digital subscriber line, and passive optical networking central office/consumer premise equipment SoCs; wireless local area network access point SoCs; Ethernet switching and routing custom silicon solutions; serializer/deserializer application specific integrated circuits; optical and copper, and physical layer devices; and fiber optic components and RF semiconductor devices. The company also offers RF front end modules and filter; Wi-Fi, Bluetooth, and global positioning system/global navigation satellite system SoCs; custom touch controllers; inductive charging; attached small computer system interface, and redundant array of independent disks controllers and adapters; peripheral component interconnect express; fiber channel host bus adapters; read channel based SoCs; custom flash controllers; preamplifiers; optocouplers, industrial fiber optics, and motion control encoders and subsystems; light emitting diode, ethernet PHYs, switch ICs, and camera microcontrollers. Its products are used in various applications, including enterprise and data center networking, home connectivity, set-top boxes, broadband access, telecommunication equipment, smartphones and base stations, data center servers and storage systems, factory automation, power generation and alternative energy systems, and electronic displays. Broadcom Inc. was founded in 1961 and is headquartered in Palo Alto, California.