Comparing Ribbon Communications (RBBN) & Applied Optoelectronics (AAOI)

Ribbon Communications (NASDAQ: RBBN) and Applied Optoelectronics (NASDAQ:AAOI) are both small-cap computer and technology companies, but which is the superior business? We will contrast the two businesses based on the strength of their dividends, earnings, analyst recommendations, institutional ownership, risk, profitability and valuation.

Institutional & Insider Ownership

32.3% of Ribbon Communications shares are owned by institutional investors. Comparatively, 76.7% of Applied Optoelectronics shares are owned by institutional investors. 7.7% of Ribbon Communications shares are owned by insiders. Comparatively, 8.2% of Applied Optoelectronics shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock will outperform the market over the long term.

Profitability

This table compares Ribbon Communications and Applied Optoelectronics’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Ribbon Communications -8.82% -1.87% -1.32%
Applied Optoelectronics 21.29% 32.35% 23.92%

Volatility & Risk

Ribbon Communications has a beta of 2.08, meaning that its share price is 108% more volatile than the S&P 500. Comparatively, Applied Optoelectronics has a beta of 2.88, meaning that its share price is 188% more volatile than the S&P 500.

Analyst Recommendations

This is a summary of recent ratings and price targets for Ribbon Communications and Applied Optoelectronics, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Ribbon Communications 1 1 4 0 2.50
Applied Optoelectronics 3 1 4 2 2.50

Ribbon Communications presently has a consensus price target of $7.05, indicating a potential downside of 10.98%. Applied Optoelectronics has a consensus price target of $58.13, indicating a potential upside of 45.46%. Given Applied Optoelectronics’ higher possible upside, analysts plainly believe Applied Optoelectronics is more favorable than Ribbon Communications.

Earnings and Valuation

This table compares Ribbon Communications and Applied Optoelectronics’ revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Ribbon Communications $252.59 million 3.22 -$13.93 million ($0.45) -17.60
Applied Optoelectronics $260.71 million 2.97 $31.23 million $4.15 9.63

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

Summary

Applied Optoelectronics beats Ribbon Communications on 12 of the 13 factors compared between the two stocks.

About Ribbon Communications

Sonus Networks, Inc., formerly Solstice Sapphire Investments, Inc., is a provider of networked solutions for communications service providers and enterprises to help them secure and unify their real-time communications infrastructures. The Company helps communications service providers and enterprises hold the session initiation protocol (SIP) and fourth generation (4G)/long term evolution (LTE)-based solutions, including voice over Internet protocol (VoIP), voice over wireless fidelity (VoWiFi), video and unified communications (UC) by securing and enabling Internet Protocol (IP) networks. Its products include session border controllers (SBCs), diameter signaling controllers (DSCs) and VoWiFi solutions. Sonus Products include Sonus GSX9000 Open Services Switch, Sonus T7000 Intelligent Switching System, Sonus Diameter Signaling Controllers, Sonus Signal Transfer Points, Sonus PSX Policy & Routing Server, Sonus WebRTC Services Solution, and Sonus Network Management Solutions.

About Applied Optoelectronics

Applied Optoelectronics, Inc. is a vertically integrated provider of fiber-optic networking products, primarily for networking end markets, such as Internet data center, cable television (CATV), fiber-to-the-home (FTTH) and telecommunications (telecom). The Company designs and manufactures a range of optical communications products at varying levels of integration, from components, subassemblies and modules to turnkey equipment. To Internet-based data center operators, it supplies optical transceivers that plug into switches and servers within the data center and allow these network devices to send and receive data over fiber optic cables. The Company supplies a range of products, including lasers, transmitters and transceivers, and turnkey equipment, to the CATV market. The Company designs, manufactures and integrates its own analog and digital lasers using a combination of Metal Organic Chemical Vapor Deposition (MOCVD) and its Molecular Beam Epitaxy (MBE) fabrication process.

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