Harmonic (NASDAQ: HLIT) and InterDigital (NASDAQ:IDCC) are both computer and technology companies, but which is the superior investment? We will contrast the two companies based on the strength of their dividends, earnings, valuation, institutional ownership, profitability, risk and analyst recommendations.

Volatility & Risk

Harmonic has a beta of 0.96, suggesting that its stock price is 4% less volatile than the S&P 500. Comparatively, InterDigital has a beta of 0.95, suggesting that its stock price is 5% less volatile than the S&P 500.

Institutional and Insider Ownership

99.1% of Harmonic shares are held by institutional investors. Comparatively, 71.0% of InterDigital shares are held by institutional investors. 4.3% of Harmonic shares are held by insiders. Comparatively, 1.9% of InterDigital shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Analyst Recommendations

This is a summary of recent recommendations and price targets for Harmonic and InterDigital, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Harmonic 0 2 1 0 2.33
InterDigital 0 3 2 0 2.40

Harmonic currently has a consensus price target of $5.50, indicating a potential upside of 86.44%. InterDigital has a consensus price target of $91.33, indicating a potential upside of 30.38%. Given Harmonic’s higher possible upside, equities research analysts plainly believe Harmonic is more favorable than InterDigital.

Valuation and Earnings

This table compares Harmonic and InterDigital’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Harmonic $379.77 million 0.63 -$18.46 million ($1.03) -2.86
InterDigital $712.48 million 3.41 $534.85 million $9.23 7.59

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

Dividends

InterDigital pays an annual dividend of $1.20 per share and has a dividend yield of 1.7%. Harmonic does not pay a dividend. InterDigital pays out 13.0% of its earnings in the form of a dividend.

Profitability

This table compares Harmonic and InterDigital’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Harmonic -21.58% -13.22% -6.31%
InterDigital 45.92% 44.58% 19.04%

Summary

InterDigital beats Harmonic on 10 of the 15 factors compared between the two stocks.

Harmonic Company Profile

Harmonic Inc. (Harmonic) designs, manufactures and sells video infrastructure products, and system solutions. The Company has two segments: Video and Cable Edge. Harmonic provides technical support and professional services to its customers around the world. The Video segment sells video processing and production, and playout solutions and services to broadcast and media companies, streaming media companies, cable operators, and satellite and telecommunications (telco), and pay television (TV) service providers. Its Cable Edge business sells cable edge solutions and related services to cable operators around the world. The Video segment offers a range of products and solutions, as well as software-based media processing platforms. The Company’s Narrowcast Services Gateway (NSG) products are integrated edge gateway products that integrate routing, multiplexing, scrambling and modulation into a single package for the delivery of narrowcast services to subscribers over cable networks.

InterDigital Company Profile

InterDigital, Inc. designs and develops technologies for wireless communications. The Company is focused on three technology areas: cellular wireless technology, Internet of things (IoT) technology, and, through its Hillcrest Laboratories, Inc. (Hillcrest Labs) subsidiary, sensor and sensor fusion technology. It offers a range of technologies that are used in digital cellular and wireless products and networks, including second generation (2G), third generation (3G), fourth generation (4G) and IEEE 802-related products and networks. Products incorporating its inventions include mobile devices, such as cellular phones, tablets, notebook computers and wireless personal digital assistants; wireless infrastructure equipment, such as base stations; components, dongles and modules for wireless devices, and IoT devices and software platforms. The Company is developing a range of technologies in the areas of video compression and delivery, security, analytics, and other areas.

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