Contrasting Ultra Clean (UCTT) and Mellanox Technologies (MLNX)

Ultra Clean (NASDAQ: UCTT) and Mellanox Technologies (NASDAQ:MLNX) are both computer and technology companies, but which is the better stock? We will compare the two companies based on the strength of their dividends, institutional ownership, analyst recommendations, profitability, valuation, earnings and risk.

Profitability

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This table compares Ultra Clean and Mellanox Technologies’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Ultra Clean 8.12% 29.62% 16.22%
Mellanox Technologies -2.25% 4.76% 3.35%

Valuation and Earnings

This table compares Ultra Clean and Mellanox Technologies’ top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Ultra Clean $924.35 million 0.80 $75.08 million $2.34 8.25
Mellanox Technologies $863.89 million 4.62 -$19.42 million $0.91 84.18

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

Volatility and Risk

Ultra Clean has a beta of 0.89, meaning that its stock price is 11% less volatile than the S&P 500. Comparatively, Mellanox Technologies has a beta of 0.54, meaning that its stock price is 46% less volatile than the S&P 500.

Insider & Institutional Ownership

69.3% of Ultra Clean shares are held by institutional investors. Comparatively, 68.1% of Mellanox Technologies shares are held by institutional investors. 2.6% of Ultra Clean shares are held by insiders. Comparatively, 6.1% of Mellanox Technologies shares are held by 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.

Analyst Ratings

This is a breakdown of current ratings for Ultra Clean and Mellanox Technologies, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Ultra Clean 0 1 4 0 2.80
Mellanox Technologies 1 5 8 0 2.50

Ultra Clean currently has a consensus price target of $31.60, suggesting a potential upside of 63.73%. Mellanox Technologies has a consensus price target of $75.36, suggesting a potential downside of 1.61%. Given Ultra Clean’s stronger consensus rating and higher probable upside, equities research analysts clearly believe Ultra Clean is more favorable than Mellanox Technologies.

Summary

Ultra Clean beats Mellanox Technologies on 10 of the 14 factors compared between the two stocks.

Ultra Clean Company Profile

Ultra Clean Holdings, Inc. designs, develops, prototypes, engineers, manufactures, and tests production tools, modules, and subsystems for the semiconductor and display capital equipment industries primarily in North America, Asia, and Europe. It offers precision robotic systems that are used when accurate controlled motion is required; gas delivery systems, which include one or more gas lines consisting of small diameter internally polished stainless steel tubing products, filters, mass flow controllers, regulators, pressure transducers and valves, component heaters, and an integrated electronic and/or pneumatic control system; and various industrial and automation production equipment products. The company also provides subsystems, such as wafer cleaning modules; chemical delivery modules that deliver gases and reactive chemicals in a liquid or gaseous form from a centralized subsystem to the reaction chamber; frame assemblies, which are support structures fabricated from steel tubing or folded sheet metal; and top-plate assemblies. In addition, it offers fluid delivery systems consists of one or more chemical delivery units; process modules, which are the subsystems of semiconductor manufacturing tools that process integrated circuits onto wafers; and other high level assemblies. The company primarily serves original equipment manufacturing customers in the semiconductor capital equipment, consumer, medical, energy, industrial, and research industries. Ultra Clean Holding, Inc. was founded in 1991 and is headquartered in Hayward, California.

Mellanox Technologies Company Profile

Mellanox Technologies, Ltd., a fabless semiconductor company, designs, manufactures, and sells interconnect products and solutions worldwide. Its products facilitate data transmission between servers, storage systems, communications infrastructure equipment, and other embedded systems. The company offers InfiniBand solutions, including switch and gateway integrated circuits (ICs), adapter cards, cables, modules, and software, as well as switch, gateway, and long-haul systems; Ethernet solutions, such as Ethernet switch products and Ethernet adapters for use in enterprise data center, high-performance computing, embedded environments, hyperscale, Web 2.0, and cloud data centers. It also provides adapters to server, storage, communications infrastructure, and embedded systems original equipment manufacturers (OEMs) as ICs or standard card form factors with PCI express interfaces; and switch ICs and systems to server, storage, communications infrastructure, and embedded systems OEMs to create switching equipment. In addition, the company supports server operating systems, including Linux, Windows, AIX, HPUX, Solaris, and VxWorks. It sells its products through its direct sales force, a network of sales representatives, and independent distributors. Mellanox Technologies, Ltd. was founded in 1999 and is headquartered in Sunnyvale, California.

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