Brocade Communications Systems (BRCD) and Commscope (COMM) Financial Analysis

Brocade Communications Systems (NASDAQ: BRCD) and Commscope (NASDAQ:COMM) are both mid-cap technology companies, but which is the better investment? We will compare the two businesses based on the strength of their profitability, earnings, analyst recommendations, valuation, institutional ownership, dividends and risk.

Profitability

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This table compares Brocade Communications Systems and Commscope’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Brocade Communications Systems -3.56% -3.07% -1.62%
Commscope 4.25% 26.02% 5.59%

Analyst Ratings

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

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Brocade Communications Systems 1 3 0 0 1.75
Commscope 0 2 8 0 2.80

Brocade Communications Systems currently has a consensus price target of $12.83, indicating a potential upside of 1.13%. Commscope has a consensus price target of $42.63, indicating a potential upside of 5.27%. Given Commscope’s stronger consensus rating and higher possible upside, analysts clearly believe Commscope is more favorable than Brocade Communications Systems.

Earnings & Valuation

This table compares Brocade Communications Systems and Commscope’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Brocade Communications Systems $2.35 billion 2.24 $213.81 million $0.07 181.29
Commscope $4.56 billion 1.70 $193.76 million $0.98 41.32

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

Dividends

Brocade Communications Systems pays an annual dividend of $0.22 per share and has a dividend yield of 1.7%. Commscope does not pay a dividend. Brocade Communications Systems pays out 314.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Insider & Institutional Ownership

83.7% of Brocade Communications Systems shares are held by institutional investors. 1.8% of Brocade Communications Systems shares are held by company insiders. Comparatively, 3.3% of Commscope shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Volatility and Risk

Brocade Communications Systems has a beta of 0.54, indicating that its stock price is 46% less volatile than the S&P 500. Comparatively, Commscope has a beta of 1.09, indicating that its stock price is 9% more volatile than the S&P 500.

Summary

Commscope beats Brocade Communications Systems on 11 of the 16 factors compared between the two stocks.

About Brocade Communications Systems

Brocade Communications Systems, Inc. (Brocade) is a supplier of networking hardware, software and services, including storage area networking (SAN) solutions and Internet protocol (IP) networking solutions for businesses and organizations of various types and sizes. The Company operates through three segments: SAN Products, IP Networking Products and Global Services. The SAN Products segment includes infrastructure products and solutions that help customers develop and deploy storage and server consolidation, disaster recovery and data security. The IP Networking Products segment includes Layer 2 and Layer 3 Ethernet switches, and routers to connect users over private and public networks. The Global Services segment includes break or fix maintenance, installation, consulting, network management and software maintenance, and post-contract customer support. Its products enable customers to deploy architectures and technologies, including virtualization and cloud computing.

About Commscope

CommScope Holding Company, Inc. (CommScope) is a provider of infrastructure solutions for the core, access and edge layers of communications networks. The Company operates through two segments: CommScope Connectivity Solutions (CCS) and CommScope Mobility Solutions (CMS). Its portfolio includes wireless and fiber optic solutions. The Company’s solutions are found in the venues and outdoor spaces, including in data centers and buildings of all shapes, sizes and complexities; at wireless cell sites; in telecom central offices and cable head ends; in fiber-to-the-X (FTTX) deployments, and in airports, trains and tunnels. As of December 31, 2016, it served customers in over 100 countries through a network of more than 30 manufacturing and distribution facilities located around the globe. Its customers include global telecommunication operators and enterprise customers, including Fortune 500 enterprises and multi-system operators (MSOs).

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