PDF Solutions (NASDAQ: PDFS) and FormFactor (NASDAQ:FORM) are both small-cap computer and technology companies, but which is the better business? We will compare the two businesses based on the strength of their earnings, profitability, dividends, analyst recommendations, risk, valuation and institutional ownership.

Insider & Institutional Ownership

82.5% of PDF Solutions shares are held by institutional investors. Comparatively, 86.6% of FormFactor shares are held by institutional investors. 16.2% of PDF Solutions shares are held by insiders. Comparatively, 2.3% of FormFactor shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Profitability

This table compares PDF Solutions and FormFactor’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
PDF Solutions 5.29% 2.78% 2.49%
FormFactor -1.32% 15.62% 10.19%

Earnings & Valuation

This table compares PDF Solutions and FormFactor’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
PDF Solutions $104.27 million 4.85 $9.44 million $0.18 86.83
FormFactor $519.99 million 2.43 $61.41 million ($0.11) -158.64

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

Analyst Ratings

This is a breakdown of current ratings and recommmendations for PDF Solutions and FormFactor, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
PDF Solutions 0 1 1 0 2.50
FormFactor 0 1 5 0 2.83

PDF Solutions currently has a consensus target price of $20.00, indicating a potential upside of 27.96%. FormFactor has a consensus target price of $17.67, indicating a potential upside of 1.24%. Given PDF Solutions’ higher possible upside, equities analysts clearly believe PDF Solutions is more favorable than FormFactor.

Volatility and Risk

PDF Solutions has a beta of 1.4, suggesting that its stock price is 40% more volatile than the S&P 500. Comparatively, FormFactor has a beta of 1.63, suggesting that its stock price is 63% more volatile than the S&P 500.

Summary

FormFactor beats PDF Solutions on 8 of the 13 factors compared between the two stocks.

About PDF Solutions

PDF Solutions, Inc. is a provider of infrastructure technologies and services for integrated circuits (IC). The Company’s technologies and services focus on the IC manufacturing process life cycle. It operates in the segment of licensing and implementation of yield improvement solutions for integrated circuit manufacturers. The Company’s solutions combine software, test chips, an electrical wafer test system, methodologies and professional services. The Company has developed solutions for yield simulation, analysis, loss detection, and improvement. Its characterization vehicle infrastructure (CVi) enables customers to electrically characterize the manufacturing process, and establish fail-rate information needed to calibrate manufacturing yield models and prioritize yield improvement activities. Its Exensio YieldAware solution combines software and services to enable customers to collect and combine product test data and equipment signals during production.

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.

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