Financial Analysis: EZchip Semiconductor (EZCH) versus Arrow Electronics (ARW)

EZchip Semiconductor (NASDAQ: EZCH) and Arrow Electronics (NYSE:ARW) are both technology companies, but which is the superior stock? We will contrast the two companies based on the strength of their risk, dividends, profitability, valuation, analyst recommendations, institutional ownership and earnings.

Analyst Ratings

This is a summary of recent recommendations and price targets for EZchip Semiconductor and Arrow Electronics, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
EZchip Semiconductor 0 0 0 0 N/A
Arrow Electronics 0 1 2 1 3.00

Arrow Electronics has a consensus target price of $89.50, suggesting a potential upside of 9.40%. Given Arrow Electronics’ higher probable upside, analysts plainly believe Arrow Electronics is more favorable than EZchip Semiconductor.

Profitability

This table compares EZchip Semiconductor and Arrow Electronics’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
EZchip Semiconductor 17.05% 6.03% 5.64%
Arrow Electronics 1.50% 14.12% 4.59%

Earnings & Valuation

This table compares EZchip Semiconductor and Arrow Electronics’ top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
EZchip Semiconductor N/A N/A N/A ($0.17) -149.94
Arrow Electronics $26.81 billion 0.27 $401.96 million $4.47 18.30

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

Institutional and Insider Ownership

91.5% of Arrow Electronics shares are held by institutional investors. 1.2% of Arrow Electronics shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock is poised for long-term growth.

Risk & Volatility

EZchip Semiconductor has a beta of 0.33, suggesting that its share price is 67% less volatile than the S&P 500. Comparatively, Arrow Electronics has a beta of 1.17, suggesting that its share price is 17% more volatile than the S&P 500.

Summary

Arrow Electronics beats EZchip Semiconductor on 10 of the 12 factors compared between the two stocks.

About EZchip Semiconductor

EZchip Semiconductor Ltd.is a fabless semiconductor company that provides data-path processing solutions for a range of applications for carrier, cloud and data center networks. The Company’s portfolio of solutions includes network processors, multi-core processors, network adapters and appliances with a software ecosystem. It designs and sells network processors for networking equipment, integrating several key functions into a single chip. Networking equipment vendors use the Company’s network processors to form the silicon core of networking equipment, such as switches and routers, for voice, video and data integration in a variety of applications. The Company’s network processors are single-chip solutions that enable its customers to design multi-port line cards. Its multi-core processors allow customers to design systems that are high performance, as well as power efficient. The Company’s subsidiaries include EZchip Technologies Ltd., EZchip Inc. and EZchip Semiconductor Inc.

About Arrow Electronics

Arrow Electronics, Inc. is a provider of products, services and solutions to industrial and commercial users of electronic components and enterprise computing solutions. The Company has a portfolio of product offerings available from various electronic components and enterprise computing solutions suppliers. The Company’s segments include the global components business; the global enterprise computing solutions (ECS) business, and corporate business segment. It distributes electronic components to original equipment manufacturers and contract manufacturers through its global components business segment. Through global ECS business segment, it provides enterprise computing solutions to value-added resellers. The Global components segment markets and distributes electronic components and provides a range of value-added capabilities. Global ECS’ portfolio of computing solutions includes datacenter, cloud, security, and analytics solutions.

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