ARM (NASDAQ:ARM) vs. Tower Semiconductor (NASDAQ:TSEM) Critical Comparison

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

Analyst Recommendations

This is a summary of recent ratings and recommmendations for ARM and Tower Semiconductor, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
ARM	0	7	19	1	2.78
Tower Semiconductor	0	2	3	0	2.60

ARM presently has a consensus target price of $179.80, suggesting a potential upside of 32.17%. Tower Semiconductor has a consensus target price of $119.25, suggesting a potential upside of 23.36%. Given ARM’s stronger consensus rating and higher probable upside, analysts clearly believe ARM is more favorable than Tower Semiconductor.

Institutional & Insider Ownership

7.5% of ARM shares are held by institutional investors. Comparatively, 70.5% of Tower Semiconductor shares are held by institutional investors. 1.0% of Tower Semiconductor shares are held by 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.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
ARM	18.81%	15.03%	11.39%
Tower Semiconductor	13.20%	7.37%	6.34%

Earnings & Valuation

This table compares ARM 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
ARM	$4.01 billion	35.87	$792.00 million	$0.78	174.41
Tower Semiconductor	$1.51 billion	7.08	$207.86 million	$1.72	56.20

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

Volatility & Risk

ARM has a beta of 4.11, suggesting that its share price is 311% more volatile than the S&P 500. Comparatively, Tower Semiconductor has a beta of 0.94, suggesting that its share price is 6% less volatile than the S&P 500.

Summary

ARM beats Tower Semiconductor on 12 of the 15 factors compared between the two stocks.

About ARM

Arm Holdings Plc engages in the licensing, marketing, research, and development of microprocessors, systems IP, graphics processing units, physical IP and associated systems IP, software, and tools. It operates through the following geographical segments: United Kingdom, United States, and Other Countries. The company was founded on November 12, 1990 and is headquartered in Cambridge, the United Kingdom.

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.