Critical Review: Cree (CREE) versus Xilinx (XLNX)

Cree (NASDAQ: CREE) and Xilinx (NASDAQ:XLNX) are both mid-cap computer and technology companies, but which is the superior investment? We will contrast the two businesses based on the strength of their institutional ownership, earnings, dividends, profitability, risk, valuation and analyst recommendations.

Profitability

This table compares Cree and Xilinx’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Cree -7.17% -0.13% -0.11%
Xilinx 26.22% 24.70% 12.78%

Analyst Recommendations

This is a breakdown of current recommendations for Cree and Xilinx, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Cree 2 9 2 0 2.00
Xilinx 2 11 8 0 2.29

Cree presently has a consensus price target of $23.32, suggesting a potential downside of 5.52%. Xilinx has a consensus price target of $63.89, suggesting a potential downside of 1.70%. Given Xilinx’s stronger consensus rating and higher possible upside, analysts plainly believe Xilinx is more favorable than Cree.

Dividends

Xilinx pays an annual dividend of $1.40 per share and has a dividend yield of 2.2%. Cree does not pay a dividend. Xilinx pays out 60.1% of its earnings in the form of a dividend. Cree has raised its dividend for 6 consecutive years.

Insider and Institutional Ownership

91.2% of Cree shares are held by institutional investors. Comparatively, 97.4% of Xilinx shares are held by institutional investors. 1.3% of Cree shares are held by insiders. Comparatively, 0.4% of Xilinx shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Volatility and Risk

Cree has a beta of 0.99, indicating that its share price is 1% less volatile than the S&P 500. Comparatively, Xilinx has a beta of 1.08, indicating that its share price is 8% more volatile than the S&P 500.

Valuation and Earnings

This table compares Cree and Xilinx’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Cree $1.47 billion 1.64 $101.00 million ($1.01) -24.44
Xilinx $2.39 billion 6.76 $755.86 million $2.33 27.90

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

Summary

Xilinx beats Cree on 13 of the 16 factors compared between the two stocks.

Cree Company Profile

Cree, Inc. is a manufacturer of lighting-class light emitting diode (LED) products, lighting products and semiconductor products for power and radio-frequency (RF) applications. The Company’s products are focused for applications, such as indoor and outdoor lighting, video displays, transportation, electronic signs and signals, power supplies, inverters and wireless systems. The Company has three segments: Lighting Products, LED Products, and Power and RF Products. The Company’s Lighting Products segment offers LED lighting systems and bulbs. The Company’s LED Products segment offers LED components, LED chips and silicon carbide (SiC) materials. The Company’s Power and RF Products segment offers power devices and RF devices. The Company designs, manufactures and markets lighting systems for indoor and outdoor applications, with a focus on LED lighting systems for the commercial, industrial and consumer markets.

Xilinx Company Profile

Xilinx, Inc. (Xilinx) is engaged in designing and developing programmable devices and associated technologies. The Company’s programmable devices and associated technologies include integrated circuits (ICs) in the form of programmable logic devices (PLDs), including programmable System on Chips (SoCs) and three-dimensional ICs (3D ICs); software design tools to program the PLDs; targeted reference designs; printed circuit boards, and intellectual property (IP), which consists of Xilinx, and various third-party verification and IP cores. The Company provides design services, customer training, field engineering and technical support. Its PLDs include field programmable gate arrays (FPGAs), complex programmable logic devices (CPLDs) that its customers program to perform desired logic functions, and programmable SoCs, which combine (Advanced reduced instruction set computing (RISC) Machines (ARM)) processor-based systems with programmable logic in a single device.

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