Microchip Technology (NASDAQ: MCHP) and Celestica (NYSE:CLS) are both computer and technology companies, but which is the superior business? We will contrast the two businesses based on the strength of their risk, dividends, earnings, valuation, institutional ownership, profitability and analyst recommendations.

Institutional and Insider Ownership

98.7% of Microchip Technology shares are held by institutional investors. Comparatively, 59.8% of Celestica shares are held by institutional investors. 2.1% of Microchip Technology shares are held by insiders. Comparatively, 1.0% of Celestica shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company will outperform the market over the long term.

Dividends

Microchip Technology pays an annual dividend of $1.45 per share and has a dividend yield of 1.6%. Celestica does not pay a dividend. Microchip Technology pays out 77.5% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Microchip Technology has raised its dividend for 15 consecutive years.

Risk and Volatility

Microchip Technology has a beta of 1.07, suggesting that its share price is 7% more volatile than the S&P 500. Comparatively, Celestica has a beta of 0.72, suggesting that its share price is 28% less volatile than the S&P 500.

Analyst Ratings

This is a breakdown of recent recommendations and price targets for Microchip Technology and Celestica, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Microchip Technology 0 4 13 0 2.76
Celestica 0 9 2 0 2.18

Microchip Technology presently has a consensus price target of $89.93, indicating a potential downside of 1.50%. Celestica has a consensus price target of $14.02, indicating a potential upside of 12.12%. Given Celestica’s higher probable upside, analysts plainly believe Celestica is more favorable than Microchip Technology.

Profitability

This table compares Microchip Technology and Celestica’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Microchip Technology 12.53% 34.33% 13.56%
Celestica 2.12% 13.64% 6.09%

Earnings & Valuation

This table compares Microchip Technology and Celestica’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Microchip Technology $3.58 billion 5.94 $1.25 billion $1.87 48.82
Celestica $6.21 billion 0.29 $256.20 million $0.92 13.59

Microchip Technology has higher revenue, but lower earnings than Celestica. Celestica is trading at a lower price-to-earnings ratio than Microchip Technology, indicating that it is currently the more affordable of the two stocks.

Summary

Microchip Technology beats Celestica on 14 of the 17 factors compared between the two stocks.

About Microchip Technology

Microchip Technology Incorporated is engaged in developing, manufacturing and selling specialized semiconductor products used by its customers for a range of embedded control applications. The Company operates through two segments: semiconductor products and technology licensing. In the semiconductor products segment, the Company designs, develops, manufactures and markets microcontrollers, development tools and analog, interface, mixed signal and timing products. Its functional activities include sales, marketing, manufacturing, information technology, human resources, legal and finance. Its product portfolio comprises general purpose and specialized 8-bit, 16-bit, and 32-bit microcontrollers, a spectrum of linear, mixed-signal, power management, thermal management, radio frequency (RF), timing, safety, security, wired connectivity and wireless connectivity devices, as well as serial electrically erasable programmable read-only memories (EEPROMs) and serial flash memories.

About Celestica

Celestica Inc. is a provider of supply chain solutions. The Company operates in electronics manufacturing services business segment. The Company offers a range of services to its customers, including design and development, engineering services, supply chain management, new product introduction, component sourcing, electronics manufacturing, assembly and test, complex mechanical assembly, systems integration, precision machining, order fulfillment, logistics and after-market repair and return services. Its products and services serve a range of applications, including servers; storage systems; optical equipment; aerospace and defense electronics; healthcare products and applications; semiconductor equipment, and a range of industrial and alternative energy products, including solar panels and inverters. It designs, manufactures and tests solar panels for the residential, commercial and utility scale markets. It uses technologies in the assembly and testing of its products.

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