Contrasting FormFactor (FORM) & Ultra Clean (UCTT)

FormFactor (NASDAQ: FORM) and Ultra Clean (NASDAQ:UCTT) are both small-cap technology companies, but which is the better stock? We will contrast the two businesses based on the strength of their earnings, risk, valuation, institutional ownership, profitability, analyst recommendations and dividends.

Insider and Institutional Ownership

84.6% of FormFactor shares are owned by institutional investors. Comparatively, 75.5% of Ultra Clean shares are owned by institutional investors. 2.3% of FormFactor shares are owned by company insiders. Comparatively, 2.6% of Ultra Clean 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.

Profitability

This table compares FormFactor and Ultra Clean’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
FormFactor 3.68% 16.80% 11.20%
Ultra Clean 7.55% 28.77% 16.02%

Analyst Recommendations

This is a summary of current ratings for FormFactor and Ultra Clean, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
FormFactor 0 1 4 1 3.00
Ultra Clean 0 0 5 0 3.00

FormFactor currently has a consensus target price of $18.73, suggesting a potential upside of 20.86%. Ultra Clean has a consensus target price of $32.40, suggesting a potential upside of 21.48%. Given Ultra Clean’s higher probable upside, analysts clearly believe Ultra Clean is more favorable than FormFactor.

Valuation and Earnings

This table compares FormFactor and Ultra Clean’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
FormFactor $383.88 million 2.95 -$6.55 million $0.26 59.62
Ultra Clean $562.76 million 1.59 $10.05 million $1.88 14.19

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

Volatility and Risk

FormFactor has a beta of 1.46, meaning that its share price is 46% more volatile than the S&P 500. Comparatively, Ultra Clean has a beta of 1.02, meaning that its share price is 2% more volatile than the S&P 500.

Summary

Ultra Clean beats FormFactor on 9 of the 14 factors compared between the two stocks.

About FormFactor

FormFactor, Inc. is a provider of test and measurement solutions. The Company’s segments include the Probe Cards segment and Systems segment. The Company designs, manufactures and sells multiple product lines, including probe cards, analytical probes, probe stations, integrated measurement systems, thermal sub-systems, reliability test systems, and related services. Its products provide electrical information from a range of semiconductor and electro-optical devices and integrated circuits (devices) from development to production. Probe Cards segment consists of probe card products and analytical probes. Systems segment consists of wafer probing, thermal and reliability products to enable precision on-wafer measurement of integrated circuits. Systems products are used in the early phases of the development and characterization of semiconductor processes.

About Ultra Clean

Ultra Clean Holdings, Inc. is engaged in the design, engineering and manufacture of production tools, modules and subsystems the semiconductor capital equipment industry. The Company’s products include precision robotic solutions; gas delivery systems; a range of industrial and automation production equipment products; subsystems that includes wafer cleaning sub-systems, chemical delivery modules, top-plate assemblies, frame assemblies, and process modules. The Company offers its products for the semiconductor capital equipment and equipment industry segments. It also sells to the consumer, medical, energy, industrial, flat panel and research equipment industries. The Company is focused on providing specialized engineering and manufacturing solutions for these applications. It provides its original equipment manufacturing (OEM) customers an outsourced solution for the development, design, component sourcing, prototyping, engineering, manufacturing and testing of various systems.

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