Mercury Systems (NASDAQ: MRCY) and AeroVironment (NASDAQ:AVAV) are both computer and technology companies, but which is the better stock? We will contrast the two companies based on the strength of their valuation, risk, earnings, institutional ownership, profitability, dividends and analyst recommendations.

Institutional and Insider Ownership

96.4% of Mercury Systems shares are owned by institutional investors. Comparatively, 77.7% of AeroVironment shares are owned by institutional investors. 3.5% of Mercury Systems shares are owned by company insiders. Comparatively, 11.0% of AeroVironment shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock will outperform the market over the long term.

Analyst Recommendations

This is a breakdown of recent ratings and target prices for Mercury Systems and AeroVironment, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Mercury Systems 0 2 5 0 2.71
AeroVironment 0 4 0 0 2.00

Mercury Systems currently has a consensus target price of $50.20, indicating a potential downside of 0.53%. AeroVironment has a consensus target price of $39.00, indicating a potential downside of 23.77%. Given Mercury Systems’ stronger consensus rating and higher possible upside, equities research analysts clearly believe Mercury Systems is more favorable than AeroVironment.

Profitability

This table compares Mercury Systems and AeroVironment’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Mercury Systems 9.14% 6.51% 5.12%
AeroVironment 7.22% 5.40% 4.83%

Risk and Volatility

Mercury Systems has a beta of 0.41, suggesting that its stock price is 59% less volatile than the S&P 500. Comparatively, AeroVironment has a beta of 1.29, suggesting that its stock price is 29% more volatile than the S&P 500.

Earnings & Valuation

This table compares Mercury Systems and AeroVironment’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Mercury Systems $408.59 million 5.94 $77.23 million $0.86 58.69
AeroVironment $272.42 million 4.38 $29.48 million $0.84 60.91

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

Summary

Mercury Systems beats AeroVironment on 12 of the 14 factors compared between the two stocks.

About Mercury Systems

Mercury Systems, Inc. is a commercial provider of secure processing subsystems designed and made in the United States. The Company’s solutions support a range of defense and intelligence programs. Its technologies include embedded processing modules and subsystems, radio frequency (RF) and microwave multi-function assemblies, as well as subsystems, and RF and microwave components. It designs and builds RF and microwave components and subsystems for the electronic warfare (EW), signals intelligence (SIGINT) and other communications requirements and applications. It offers analyst services and systems engineering support, consulting, maintenance and other support, testing and installation. It designs, markets and sells software and middleware environments for the development and execution of signal and image processing applications on a range of heterogeneous and multi-computing platforms. It also offers solutions in mission computing, safety-critical avionics and platform management.

About AeroVironment

AeroVironment, Inc. designs, develops, produces, supports and operates a portfolio of products and services for government agencies, businesses and consumers. The Company operates through two segments: Unmanned Aircraft Systems (UAS), which focuses primarily on the design, development, production, support and operation of UAS and tactical missile systems that provide situational awareness, multi-band communications, force protection and other mission effects, and Efficient Energy Systems (EES), which focuses primarily on the design, development, production, marketing, support and operation of electric energy systems. The Company supplies UAS, tactical missile systems and related services primarily to organizations within the United States Department of Defense (DoD). The Company also supplies charging systems and services for electric vehicles (EVs), and power cycling and test systems to commercial, consumer and government customers.

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