Financial Analysis: Tower Semiconductor (NASDAQ:TSEM) versus Lam Research (NASDAQ:LRCX)

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

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Lam Research	29.66%	60.60%	28.00%
Tower Semiconductor	13.20%	7.37%	6.34%

Analyst Ratings

This is a summary of current recommendations for Lam Research and Tower Semiconductor, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Lam Research	0	9	26	1	2.78
Tower Semiconductor	0	2	3	0	2.60

Lam Research presently has a consensus target price of $149.04, suggesting a potential downside of 2.79%. Tower Semiconductor has a consensus target price of $119.25, suggesting a potential upside of 20.35%. Given Tower Semiconductor’s higher possible upside, analysts clearly believe Tower Semiconductor is more favorable than Lam Research.

Institutional and Insider Ownership

84.6% of Lam Research shares are owned by institutional investors. Comparatively, 70.5% of Tower Semiconductor shares are owned by institutional investors. 0.3% of Lam Research shares are owned by company insiders. Comparatively, 1.0% of Tower Semiconductor shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock will outperform the market over the long term.

Earnings and Valuation

This table compares Lam Research and Tower Semiconductor”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Lam Research	$19.59 billion	9.83	$5.36 billion	$4.54	33.77
Tower Semiconductor	$1.51 billion	7.26	$207.86 million	$1.72	57.61

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

Volatility and Risk

Lam Research has a beta of 1.87, meaning that its share price is 87% more volatile than the S&P 500. Comparatively, Tower Semiconductor has a beta of 0.94, meaning that its share price is 6% less volatile than the S&P 500.

Summary

Lam Research beats Tower Semiconductor on 12 of the 15 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 Tower Semiconductor

Tower Semiconductor Ltd., an independent semiconductor foundry, focus on specialty process technologies to manufacture analog intensive mixed-signal semiconductor devices in Israel, the United States, Japan, Europe, and internationally. It provides various customizable process technologies, including SiGe, BiCMOS, mixed signal/CMOS, RF CMOS, CMOS image sensor, integrated power management, and MEMS. The Company also provides design enablement platform for quick and accurate design cycle, as well as transfer optimization and development process services to integrated device manufacturers and fabless companies. It serves various markets, such as consumer electronics, personal computers, communications, automotive, industrial, aerospace, military, and medical device products. The company was incorporated in 1993 and is headquartered in Migdal Haemek, Israel.