Xperi (NASDAQ: XPER) and STR (OTCMKTS:STRI) are both small-cap business services companies, but which is the better investment? We will contrast the two companies based on the strength of their earnings, institutional ownership, valuation, profitability, risk, analyst recommendations and dividends.

Insider & Institutional Ownership

99.6% of Xperi shares are held by institutional investors. Comparatively, 0.0% of STR shares are held by institutional investors. 2.4% of Xperi shares are held by company insiders. Comparatively, 10.3% of STR shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Profitability

This table compares Xperi and STR’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Xperi -22.54% 8.10% 3.38%
STR -63.78% -28.89% -24.24%

Dividends

Xperi pays an annual dividend of $0.80 per share and has a dividend yield of 4.2%. STR does not pay a dividend. Xperi pays out -55.6% of its earnings in the form of a dividend.

Analyst Ratings

This is a breakdown of recent recommendations for Xperi and STR, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Xperi 0 1 1 0 2.50
STR 0 0 0 0 N/A

Xperi currently has a consensus price target of $53.00, indicating a potential upside of 181.17%. Given Xperi’s higher possible upside, equities research analysts clearly believe Xperi is more favorable than STR.

Earnings and Valuation

This table compares Xperi and STR’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Xperi $259.57 million 3.58 $56.08 million ($1.44) -13.09
STR $20.11 million 0.27 -$15.87 million ($0.45) -0.62

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

Volatility and Risk

Xperi has a beta of 0.73, suggesting that its share price is 27% less volatile than the S&P 500. Comparatively, STR has a beta of 1.47, suggesting that its share price is 47% more volatile than the S&P 500.

Summary

Xperi beats STR on 11 of the 14 factors compared between the two stocks.

About Xperi

Tessera Holding Corporation is a product and technology licensing company. The Company’s technologies and intellectual property are deployed, in areas, such as audio, computational imaging, computer vision, mobile computing and communications, memory, data storage, three dimensional (3D) semiconductor interconnect and packaging. The Company delivers smart sight and sound solutions, and 3D semiconductor interconnect solutions for mobile devices, consumer electronics, and automotive markets. The Company also addresses technologies, such as Internet of Things (IoT) and augmented reality/virtual reality (AR/VR). It offers audio solutions for mobile devices, home theater systems and cinema. The Company’s subsidiaries include Tessera Technologies, Inc., DTS, Inc., Invensas Corporation and FotoNation.

About STR

STR Holdings, Inc. is a holding company. The Company is a provider of encapsulants to the solar industry. Encapsulant is a component used to protect solar cells and hold solar modules together. The Company has developed ethylene-vinyl acetate (EVA)-based encapsulants for use in commercial solar module manufacturing. The Company’s encapsulant formulations offer a range of properties and processing attributes, including various curing times and temperatures that align with the requirements of its customers’ individual lamination processes and module constructions. The Company’s formulations can be used in both crystalline silicon and thin-film modules. The Company operates production facilities in Llanera, Asturias, Spain and Shajiabang, Changshu, Jiangsu Province, China. It has a total annual production capacity of approximately 5.1 gigawatts. Its customers are solar module manufacturers located mainly in North America, Europe and Asia.

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