Critical Contrast: CTS (CTS) vs. Electro Scientific Industries (ESIO)

CTS (NYSE: CTS) and Electro Scientific Industries (NASDAQ:ESIO) are both small-cap computer and technology companies, but which is the superior business? We will compare the two businesses based on the strength of their institutional ownership, valuation, earnings, profitability, analyst recommendations, dividends and risk.

Insider and Institutional Ownership

93.8% of CTS shares are owned by institutional investors. Comparatively, 75.3% of Electro Scientific Industries shares are owned by institutional investors. 1.8% of CTS shares are owned by company insiders. Comparatively, 6.2% of Electro Scientific Industries shares are owned by company 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 breakdown of recent recommendations and price targets for CTS and Electro Scientific Industries, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
CTS 0 0 0 0 N/A
Electro Scientific Industries 0 0 3 0 3.00

Electro Scientific Industries has a consensus target price of $26.33, suggesting a potential upside of 21.46%. Given Electro Scientific Industries’ higher probable upside, analysts clearly believe Electro Scientific Industries is more favorable than CTS.

Risk and Volatility

CTS has a beta of 1.12, indicating that its share price is 12% more volatile than the S&P 500. Comparatively, Electro Scientific Industries has a beta of 0.74, indicating that its share price is 26% less volatile than the S&P 500.

Dividends

CTS pays an annual dividend of $0.16 per share and has a dividend yield of 0.6%. Electro Scientific Industries does not pay a dividend. CTS pays out 14.7% of its earnings in the form of a dividend. CTS has raised its dividend for 3 consecutive years.

Earnings and Valuation

This table compares CTS and Electro Scientific Industries’ top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
CTS $396.68 million 2.21 $34.38 million $1.09 24.40
Electro Scientific Industries $161.02 million 4.51 -$37.40 million ($0.63) -34.41

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

Profitability

This table compares CTS and Electro Scientific Industries’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
CTS 8.79% 11.47% 7.16%
Electro Scientific Industries -9.00% -13.50% -8.93%

Summary

CTS beats Electro Scientific Industries on 11 of the 16 factors compared between the two stocks.

About CTS

CTS Corporation is a manufacturer of sensors, electronic components and actuators. The Company designs, manufactures and sells a line of sensors, electronic components and actuators primarily to original equipment manufacturers (OEMs) for the transportation, industrial, medical, information technology, defense and aerospace, and communications markets. It operates manufacturing facilities in North America, Asia and Europe. Its products perform specific electronic functions for a given product family and are intended for use in customer assemblies. The Company’s products consist principally of sensors and actuators used in passenger or commercial vehicles; electronic components used in communications infrastructure, information technology and other high-speed applications; switches and potentiometers supplied to multiple markets, and fabricated piezoelectric materials and substrates used primarily in medical, industrial, defense and aerospace, and information technology markets.

About Electro Scientific Industries

Electro Scientific Industries, Inc. and its subsidiaries supply laser-based manufacturing solutions for industries reliant on microtechnologies. The Company operates through two segments: Component Processing and Micromachining. The Component Processing segment includes interconnect products, semiconductor products and component products. The interconnect, semiconductor and component products are sold to manufacturers of electronic components and are used to drill, cut, trim, ablate and test and mark features for the functionality of the component. The Micromachining segment includes products that are sold to manufacturers of end devices across various industries and are used to drill, cut or mark features on a range of materials, generally on the casing or external surface of the end device. Its integrated solutions allow industrial designers and process engineers to control the power of laser light to transform materials. It has operations in Asia, Europe and North America.

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