Critical Comparison: ARM (NASDAQ:ARM) versus nLIGHT (NASDAQ:LASR)

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

Institutional and Insider Ownership

83.9% of nLIGHT shares are held by institutional investors. Comparatively, 7.5% of ARM shares are held by institutional investors. 6.1% of nLIGHT shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.

Risk and Volatility

nLIGHT has a beta of 2.2, suggesting that its stock price is 120% more volatile than the S&P 500. Comparatively, ARM has a beta of 4.67, suggesting that its stock price is 367% more volatile than the S&P 500.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
nLIGHT	-24.16%	-19.53%	-15.91%
ARM	18.13%	13.69%	9.70%

Earnings and Valuation

This table compares nLIGHT and ARM”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
nLIGHT	$209.92 million	2.37	-$41.67 million	($1.03)	-9.96
ARM	$3.54 billion	38.44	$306.00 million	$0.60	216.15

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

Analyst Ratings

This is a summary of current ratings and price targets for nLIGHT and ARM, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
nLIGHT	0	0	3	0	3.00
ARM	2	6	18	1	2.67

nLIGHT currently has a consensus target price of $16.17, suggesting a potential upside of 57.57%. ARM has a consensus target price of $150.32, suggesting a potential upside of 15.91%. Given nLIGHT’s stronger consensus rating and higher probable upside, analysts clearly believe nLIGHT is more favorable than ARM.

Summary

ARM beats nLIGHT on 11 of the 15 factors compared between the two stocks.

About nLIGHT

nLIGHT, Inc. designs, develops, manufactures, and sells semiconductor and fiber lasers for industrial, microfabrication, and aerospace and defense applications. The company operates in two segments, Laser Products and Advanced Development. It offers semiconductor lasers with various ranges of power levels, wavelengths, and output fiber sizes; and programmable and serviceable fiber lasers for use in industrial and aerospace and defense applications. The company also provides laser sensors, including light detection and ranging technologies for intelligence, surveillance, and reconnaissance applications; and fiber amplifiers, beam combination, and control systems for use in high-energy laser systems in directed energy applications. It sells its products through direct sales force in the United States, China, South Korea, and European countries, as well as through independent sales representatives and distributors in Asia, Australia, Europe, the Middle East, and South America. The company was formerly known as nLight Photonics Corporation and changed its name to nLIGHT, Inc. in January 2016. nLIGHT, Inc. was incorporated in 2000 and is headquartered in Camas, Washington.

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.