Financial Review: ARM Holdings plc (ARMH) versus Xilinx (XLNX)

ARM Holdings plc (NASDAQ: ARMH) and Xilinx (NASDAQ:XLNX) are both technology companies, but which is the superior business? We will compare the two companies based on the strength of their dividends, analyst recommendations, institutional ownership, risk, profitability, earnings and valuation.

Analyst Recommendations

This is a summary of current ratings and recommmendations for ARM Holdings plc and Xilinx, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
ARM Holdings plc 0 1 1 0 2.50
Xilinx 2 11 8 0 2.29

Xilinx has a consensus target price of $63.89, suggesting a potential upside of 4.71%. Given Xilinx’s higher possible upside, analysts clearly believe Xilinx is more favorable than ARM Holdings plc.

Risk and Volatility

ARM Holdings plc has a beta of 1.44, suggesting that its stock price is 44% more volatile than the S&P 500. Comparatively, Xilinx has a beta of 1.09, suggesting that its stock price is 9% more volatile than the S&P 500.

Institutional and Insider Ownership

19.7% of ARM Holdings plc shares are owned by institutional investors. Comparatively, 92.4% of Xilinx shares are owned by institutional investors. 3.0% of ARM Holdings plc shares are owned by insiders. Comparatively, 0.4% of Xilinx shares are owned by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Dividends

ARM Holdings plc pays an annual dividend of $0.34 per share and has a dividend yield of 0.5%. Xilinx pays an annual dividend of $1.40 per share and has a dividend yield of 2.3%. ARM Holdings plc pays out 30.1% of its earnings in the form of a dividend. Xilinx pays out 60.1% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Xilinx has raised its dividend for 6 consecutive years. Xilinx is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

This table compares ARM Holdings plc and Xilinx’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
ARM Holdings plc 33.10% 19.72% 16.87%
Xilinx 26.22% 24.70% 12.78%

Earnings & Valuation

This table compares ARM Holdings plc and Xilinx’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
ARM Holdings plc N/A N/A N/A $1.13 59.68
Xilinx $2.39 billion 6.35 $755.86 million $2.33 26.19

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

Summary

Xilinx beats ARM Holdings plc on 8 of the 14 factors compared between the two stocks.

About ARM Holdings plc

ARM Holdings plc (ARM) is a company engaged in designing a range of inter-related intellectual property (IP), including microprocessors, Physical IP, and supporting software and tools. Its product offering includes 16/32/64-bit reduced instruction set computing (RISC) microprocessors, data engines, graphics processors, digital libraries, embedded memories, peripherals, software and development tools, as well as analog functions and high-speed connectivity products. The Company licenses and sells its technology and products to international electronics companies, which in turn manufacture, market and sell microprocessors, application-specific integrated circuits (ASICs), application-specific standard processors (ASSPs) and microcontrollers (MCUs) based on ARM’s technology to systems companies for incorporation into a range of end products. Its principal geographic markets are Europe, the United States and Asia Pacific.

About Xilinx

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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