Financial Analysis: Silicon Motion Technology Corporation (SIMO) and United Microelectronics Corporation (UMC)

Silicon Motion Technology Corporation (NASDAQ: SIMO) and United Microelectronics Corporation (NYSE:UMC) are both computer and technology companies, but which is the better business? We will compare the two businesses based on the strength of their dividends, valuation, analyst recommendations, institutional ownership, profitability, risk and earnings.

Institutional and Insider Ownership

84.5% of Silicon Motion Technology Corporation shares are held by institutional investors. Comparatively, 6.0% of United Microelectronics Corporation shares are held by institutional investors. 8.0% of United Microelectronics Corporation shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock will outperform the market over the long term.

Analyst Ratings

This is a summary of recent ratings and target prices for Silicon Motion Technology Corporation and United Microelectronics Corporation, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Silicon Motion Technology Corporation 0 3 10 0 2.77
United Microelectronics Corporation 8 0 0 0 1.00

Silicon Motion Technology Corporation currently has a consensus price target of $57.67, indicating a potential upside of 16.45%. United Microelectronics Corporation has a consensus price target of $2.10, indicating a potential downside of 21.35%. Given Silicon Motion Technology Corporation’s stronger consensus rating and higher possible upside, analysts plainly believe Silicon Motion Technology Corporation is more favorable than United Microelectronics Corporation.

Earnings & Valuation

This table compares Silicon Motion Technology Corporation and United Microelectronics Corporation’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio NetIncome Earnings Per Share Price/Earnings Ratio
Silicon Motion Technology Corporation $556.15 million 3.15 $110.94 million $2.54 19.50
United Microelectronics Corporation $4.59 billion 1.42 $266.08 million $0.14 19.07

United Microelectronics Corporation has higher revenue and earnings than Silicon Motion Technology Corporation. United Microelectronics Corporation is trading at a lower price-to-earnings ratio than Silicon Motion Technology Corporation, indicating that it is currently the more affordable of the two stocks.

Volatility and Risk

Silicon Motion Technology Corporation has a beta of 0.64, meaning that its share price is 36% less volatile than the S&P 500. Comparatively, United Microelectronics Corporation has a beta of 0.56, meaning that its share price is 44% less volatile than the S&P 500.

Profitability

This table compares Silicon Motion Technology Corporation and United Microelectronics Corporation’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Silicon Motion Technology Corporation 17.18% 19.58% 14.98%
United Microelectronics Corporation 6.90% 4.84% 2.71%

Dividends

Silicon Motion Technology Corporation pays an annual dividend of $0.89 per share and has a dividend yield of 1.8%. United Microelectronics Corporation pays an annual dividend of $0.06 per share and has a dividend yield of 2.2%. Silicon Motion Technology Corporation pays out 35.0% of its earnings in the form of a dividend. United Microelectronics Corporation pays out 42.9% 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.

Summary

Silicon Motion Technology Corporation beats United Microelectronics Corporation on 11 of the 16 factors compared between the two stocks.

About Silicon Motion Technology Corporation

Silicon Motion Technology Corporation is a fabless semiconductor company. The Company designs, develops and markets low-power semiconductor solutions to original equipment manufacturers (OEMs) and other customers in the mobile storage and mobile communications markets. It is engaged in developing negative-AND (NAND) flash controller integrated circuits (ICs) for solid-state storage devices and specialty radio frequency (RF) ICs for mobile devices. In the mobile storage market, the Company’s products are controllers used in embedded storage products, such as Solid State Drives (SSDs), and Embedded Multimedia Cards (eMMCs), as well as expandable storage products, such as flash memory cards and universal serial bus (USB) flash drives. For the mobile communications market, the Company’s products are handset transceivers and mobile television (TV) System on Chips (SoCs). The Company’s products are used in devices, such as smartphones, tablets and personal computers (PCs).

About United Microelectronics Corporation

United Microelectronics Corporation is a global semiconductor foundry. The Company provides integrated circuit (IC) production for applications spanning every sector of the electronics industry. The Company operates through two segments: wafer fabrication and new business. The primary operating activity of the Company’s wafer fabrication segment is the manufacture of chips to the design specifications of its customers by using its own processes and techniques. The new business segment primarily includes researching, developing, manufacturing, and providing solar energy and new generation light-emitting diode (LED). The Company maintains a customer base across various industries, including communication, consumer electronics, computer, memory and others, while focusing on manufacturing for applications, including networking, telecommunications, Internet, multimedia, personal computers (PCs) and graphics.

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