Critical Comparison: Rohm (OTCMKTS:ROHCY) vs. Lam Research (NASDAQ:LRCX)

Lam Research (NASDAQ:LRCX) and Rohm (OTCMKTS:ROHCY) are both large-cap computer and technology companies, but which is the better business? We will compare the two companies based on the strength of their profitability, valuation, dividends, earnings, analyst recommendations, institutional ownership and risk.

Insider and Institutional Ownership

84.6% of Lam Research shares are owned by institutional investors. 0.3% of Lam Research 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.

Profitability

This table compares Lam Research and Rohm’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Lam Research	30.94%	66.21%	31.61%
Rohm	-31.42%	3.39%	2.13%

Dividends

Lam Research pays an annual dividend of $1.04 per share and has a dividend yield of 0.3%. Rohm pays an annual dividend of $0.11 per share and has a dividend yield of 0.3%. Lam Research pays out 19.6% of its earnings in the form of a dividend. Rohm pays out -4.2% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Lam Research has increased its dividend for 10 consecutive years. Rohm is clearly the better dividend stock, given its higher yield and lower payout ratio.

Analyst Recommendations

This is a breakdown of current recommendations for Lam Research and Rohm, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Lam Research	0	7	27	0	2.79
Rohm	0	1	0	0	2.00

Lam Research currently has a consensus price target of $303.30, suggesting a potential upside of 0.01%. Given Lam Research’s stronger consensus rating and higher probable upside, research analysts clearly believe Lam Research is more favorable than Rohm.

Earnings & Valuation

This table compares Lam Research and Rohm”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Lam Research	$18.44 billion	20.57	$5.36 billion	$5.30	57.22
Rohm	$3.20 billion	3.83	-$1.05 billion	($2.64)	-12.01

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

Volatility & Risk

Lam Research has a beta of 1.85, indicating that its stock price is 85% more volatile than the S&P 500. Comparatively, Rohm has a beta of 1.29, indicating that its stock price is 29% more volatile than the S&P 500.

Summary

Lam Research beats Rohm on 15 of the 17 factors compared between the two stocks.

About Lam Research

Lam Research Corporation designs, manufactures, markets, refurbishes, and services semiconductor processing equipment used in the fabrication of integrated circuits. The company offers ALTUS systems to deposit conformal films for tungsten metallization applications; SABRE electrochemical deposition products for copper interconnect transition that offers copper damascene manufacturing; SOLA ultraviolet thermal processing products for film treatments; and VECTOR plasma-enhanced CVD ALD products. It also provides SPEED gapfill high-density plasma chemical vapor deposition products; and Striker single-wafer atomic layer deposition products for dielectric film solutions. In addition, the company offers Flex for dielectric etch applications; Kiyo for conductor etch applications; Syndion for through-silicon via etch applications; and Versys metal products for metal etch processes. Further, it provides Coronus bevel clean products to enhance die yield; Da Vinci, DV-Prime, EOS, and SP series products to address various wafer cleaning applications; and Metryx mass metrology systems for high precision in-line mass measurement in semiconductor wafer manufacturing. The company sells its products and services to semiconductors industry in the United States, China, Europe, Japan, Korea, Southeast Asia, Taiwan, and internationally. The company was incorporated in 1980 and is headquartered in Fremont, California.

About Rohm

ROHM Co., Ltd. manufactures and sells electronic components worldwide. The company operates through three segments: LSI, Semiconductor Devices, and Modules. It provides ICs comprising memory, amplifiers and linear, power management, motor/actuator drivers, resistors, clocks and timers, switches and multiplexers, logic, data converters, sensors and MEMS, display drivers, interfaces, wireless LSIs, audio and video products, speech synthesis LSI, and microcontrollers. The company also offers discrete semiconductor products, such as MOSFETs, bipolar transistors, and diodes; power devices, including power transistors and diodes, SiC power devices, IGBT, and IPM; modules, including optical modules, wireless communication modules, wireless charger modules, and print heads; and opto devices comprising LEDs, LED displays, laser diodes, and optical sensors, as well as foundry services, including thin-film piezoelectric MEMS, wafers, and WL-CSP. Its products are used in industry, automotive, consumer electronics, and telecommunications applications. The company was incorporated in 1940 and is headquartered in Kyoto, Japan.