Communications Systems (NASDAQ: JCS) and Aerohive Networks (NYSE:HIVE) are both small-cap computer and technology companies, but which is the better investment? We will contrast the two companies based on the strength of their profitability, dividends, institutional ownership, earnings, risk, analyst recommendations and valuation.

Valuation & Earnings

This table compares Communications Systems and Aerohive Networks’ top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio NetIncome Earnings Per Share Price/Earnings Ratio
Communications Systems $99.35 million 0.33 -$8.11 million ($1.34) -2.69
Aerohive Networks $169.82 million 1.48 -$36.91 million ($0.50) -9.40

Communications Systems has higher revenue, but lower earnings than Aerohive Networks. Aerohive Networks is trading at a lower price-to-earnings ratio than Communications Systems, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a summary of current ratings and target prices for Communications Systems and Aerohive Networks, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Communications Systems 0 0 1 0 3.00
Aerohive Networks 0 1 4 0 2.80

Communications Systems currently has a consensus target price of $6.00, suggesting a potential upside of 66.67%. Aerohive Networks has a consensus target price of $6.31, suggesting a potential upside of 34.26%. Given Communications Systems’ stronger consensus rating and higher probable upside, equities analysts clearly believe Communications Systems is more favorable than Aerohive Networks.

Profitability

This table compares Communications Systems and Aerohive Networks’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Communications Systems -13.91% -20.22% -16.99%
Aerohive Networks -17.00% -103.45% -18.90%

Institutional and Insider Ownership

31.8% of Communications Systems shares are held by institutional investors. Comparatively, 45.9% of Aerohive Networks shares are held by institutional investors. 17.5% of Communications Systems shares are held by company insiders. Comparatively, 26.2% of Aerohive Networks shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Volatility and Risk

Communications Systems has a beta of 1.04, meaning that its stock price is 4% more volatile than the S&P 500. Comparatively, Aerohive Networks has a beta of 1.57, meaning that its stock price is 57% more volatile than the S&P 500.

Dividends

Communications Systems pays an annual dividend of $0.16 per share and has a dividend yield of 4.4%. Aerohive Networks does not pay a dividend. Communications Systems pays out -11.9% of its earnings in the form of a dividend.

Summary

Communications Systems beats Aerohive Networks on 8 of the 15 factors compared between the two stocks.

Communications Systems Company Profile

Communications Systems, Inc. (CSI) operates directly and through its subsidiaries located in the United States, Costa Rica and the United Kingdom. The Company operates through three segments: Suttle, Transition Networks and JDL Technologies (JDL). The Company provides physical connectivity infrastructure products and services for global deployments of broadband networks. The Company is principally engaged through its subsidiary and business unit, Suttle, Inc., in the manufacture and sale of connectivity infrastructure products for broadband and voice communications, and through its another subsidiary and business unit, Transition Networks, Inc., in the manufacture and sale of core media conversion products for broadband networks. Through its JDL Technologies, Inc. subsidiary and business unit, CSI provides information technology (IT) solutions, including network design, computer infrastructure installations, IT service management, network security and network operation services.

Aerohive Networks Company Profile

Aerohive Networks, Inc. together with its subsidiaries, has designed and developed a cloud-managed mobile networking platform that enables enterprises to deploy and manage a mobile-centric network edge. Its portfolio of products and solutions is built around sets of technologies and solutions, which include Enterprise Cloud Networking, Wireless Fidelity (Wi-Fi) Connectivity and Application and Insights. It conducts its business in geographic regions, including Americas; Europe, the Middle East and Africa, and Asia Pacific. Its product portfolio includes hardware products, cloud-based network management and applications, and support services. Its hardware products include access points, branch routers and access switches. Its hardware products are developed by its hardware design team working in conjunction with original design manufacturer partners, and leverage the commercially available Wi-Fi radios, network processors, crypto accelerators and switching chips.

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