Critical Analysis: MACOM Technology Solutions (NASDAQ:MTSI) vs. Broadcom (NASDAQ:AVGO)

Broadcom (NASDAQ:AVGO) and MACOM Technology Solutions (NASDAQ:MTSI) are both large-cap technology companies, but which is the better stock? We will compare the two businesses based on the strength of their earnings, analyst recommendations, valuation, institutional ownership, dividends, profitability and risk.

Insider & Institutional Ownership

76.4% of Broadcom shares are held by institutional investors. Comparatively, 76.1% of MACOM Technology Solutions shares are held by institutional investors. 1.9% of Broadcom shares are held by insiders. Comparatively, 0.4% of MACOM Technology Solutions shares are held by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Profitability

This table compares Broadcom and MACOM Technology Solutions’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Broadcom	42.94%	48.33%	23.78%
MACOM Technology Solutions	20.70%	17.82%	12.01%

Analyst Recommendations

This is a breakdown of recent ratings for Broadcom and MACOM Technology Solutions, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Broadcom	0	4	28	1	2.91
MACOM Technology Solutions	0	3	10	2	2.93

Broadcom presently has a consensus target price of $509.04, indicating a potential upside of 42.32%. MACOM Technology Solutions has a consensus target price of $341.25, indicating a potential upside of 23.70%. Given Broadcom’s higher possible upside, research analysts plainly believe Broadcom is more favorable than MACOM Technology Solutions.

Volatility & Risk

Broadcom has a beta of 1.44, indicating that its stock price is 44% more volatile than the S&P 500. Comparatively, MACOM Technology Solutions has a beta of 1.71, indicating that its stock price is 71% more volatile than the S&P 500.

Valuation & Earnings

This table compares Broadcom and MACOM Technology Solutions”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Broadcom	$63.89 billion	26.72	$23.13 billion	$7.83	45.68
MACOM Technology Solutions	$967.26 million	21.78	-$54.21 million	$3.11	88.70

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

Summary

Broadcom beats MACOM Technology Solutions on 11 of the 15 factors compared between the two stocks.

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.

About MACOM Technology Solutions

MACOM Technology Solutions Holdings, Inc., together with its subsidiaries, designs and manufactures analog semiconductor solutions for use in wireless and wireline applications across the radio frequency (RF), microwave, millimeter wave, and lightwave spectrum in the United States, China, Australia, Japan, Malaysia, Singapore, South Korea, Taiwan, Thailand, and internationally. The company offers a portfolio of standard and custom devices, including integrated circuits, multi-chip modules, diodes, amplifiers, switches and switch limiters, passive and active components, and subsystems. Its semiconductor products are electronic components that are incorporated in electronic systems, such as wireless base stations, high-capacity optical networks, radar, and medical systems and test and measurement applications. The company serves various markets comprising telecommunication that includes carrier infrastructure, which comprise long-haul/metro, 5G, and fiber-to-the-X/passive optical network; industrial and defense, including military and commercial radar, RF jammers, electronic countermeasures, and communication data links, as well as multi-market applications, such as industrial, medical, test and measurement, and scientific applications; and data centers. It sells its products through direct sales force, applications engineering staff, independent sales representatives, resellers, and distributors. The company was founded in 1950 and is headquartered in Lowell, Massachusetts.