Extreme Networks (NASDAQ: EXTR) and Silicom (NASDAQ:SILC) are both small-cap computer and technology companies, but which is the superior investment? We will compare the two companies based on the strength of their risk, analyst recommendations, earnings, valuation, profitabiliy, dividends and institutional ownership.

Analyst Recommendations

This is a breakdown of recent recommendations for Extreme Networks and Silicom, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Extreme Networks 0 1 3 0 2.75
Silicom 0 0 1 0 3.00

Extreme Networks currently has a consensus price target of $8.25, suggesting a potential downside of 11.39%. Silicom has a consensus price target of $60.00, suggesting a potential upside of 27.33%. Given Silicom’s stronger consensus rating and higher possible upside, analysts clearly believe Silicom is more favorable than Extreme Networks.

Volatility and Risk

Extreme Networks has a beta of 1.2, indicating that its share price is 20% more volatile than the S&P 500. Comparatively, Silicom has a beta of 1.19, indicating that its share price is 19% more volatile than the S&P 500.

Earnings & Valuation

This table compares Extreme Networks and Silicom’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Extreme Networks $559.03 million 1.83 $34.08 million ($0.21) -44.33
Silicom $104.33 million 3.33 $20.46 million $1.86 25.33

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

Profitability

This table compares Extreme Networks and Silicom’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Extreme Networks -4.12% 33.40% 7.20%
Silicom 13.25% 12.29% 10.01%

Institutional and Insider Ownership

82.5% of Extreme Networks shares are held by institutional investors. Comparatively, 25.4% of Silicom shares are held by institutional investors. 1.9% of Extreme Networks shares are held by company insiders. Comparatively, 25.4% of Silicom shares are held by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Dividends

Silicom pays an annual dividend of $1.00 per share and has a dividend yield of 2.1%. Extreme Networks does not pay a dividend. Silicom pays out 53.8% of its earnings in the form of a dividend.

Summary

Silicom beats Extreme Networks on 8 of the 15 factors compared between the two stocks.

About Extreme Networks

Extreme Networks, Inc. is a provider of network infrastructure equipment. The Company markets its products to business, governmental, healthcare, service provider and educational customers with a focus on corporate enterprises and metropolitan service providers on a global basis. The Company operates through the development and marketing of network infrastructure equipment segment. The Company’s products include ExtremeWireless, ExtremeSwitching, ExtremeControl, ExtremeManagement, ExtremeCloud, ExtremeAnalytics and ExtremeSecurity. The Company offers solutions in categories, which includes industry solutions, technology solutions and managed services solutions. The Company operates in three geographical areas: Americas, which includes the United States, Canada, Mexico, Central America and South America; EMEA, which includes Europe, Russia, Middle East and Africa, and APAC, which includes Asia Pacific, South Asia, India, Australia and Japan.

About Silicom

Silicom Ltd. (Silicom) is engaged in the design, manufacture, marketing and support of networking and data infrastructure solutions for a range of servers, server-based systems and communications devices. The Company’s products include server network interface cards with and without bypass (Server Adapters); Intelligent and programmable cards, with features, such as encryption, acceleration, data compression, redirection, time stamping, network capture solutions, field programmable gate array (FPGA) based ultra-low latency solutions, and/or other offload features and/or compute blades (Smart Cards), and standalone Products. The Company’s market segments for its products include network appliances; servers; data storage, including Big Data; The Cloud, virtualized data centers, with and without software-defined networking (SDN), and Internet of Things (IOT).

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