Lumentum Holdings Inc. (NASDAQ:LITE) and Motorola Solutions, Inc. (NASDAQ:MSI) are both Technology companies that recently hit new highs. This price action has ruffled more than a few feathers in the investment community, but is one a better investment than the other? To answer this, we will compare the two companies across growth, profitability, risk, return, dividends, and valuation measures.
Lumentum Holdings Inc. (NASDAQ:LITE) operates in the Communication Equipment segment of the Technology sector. The company has grown sales at a 6.60% annual rate over the past five years, putting it in the medium growth category. LITE has a net profit margin of -10.30% and is less profitable than the average company in the Communication Equipment industry. In terms of efficiency, LITE has an asset turnover ratio of 1. This figure represents the amount of revenue a company generates per dollar of assets. LITE’s financial leverage ratio is 0.99, which indicates that the company’s asset base is primarily funded by equity capital. Company’s return on equity, which is really just the product of the company’s profit margin, asset turnover, and financial leverage ratios, is -19.70%, which is worse than the Communication Equipment industry average ROE.
Stock’s free cash flow yield, which represents the amount of cash available to investors before dividends, expressed as a percentage of the stock price, is -0.7. The average investment recommendation for LITE, taken from a group of Wall Street Analysts, is 2.10, or a buy.
Over the past three months, Lumentum Holdings Inc. insiders have been net sellers, acquiring a net of 35,279 shares. This implies that insiders have been feeling relatively bullish about the outlook for LITE. Motorola Solutions, Inc. (NYSE:MSI) operates in the Communication Equipment segment of the Technology sector. MSI has increased sales at a -5.90% CAGR over the past five years, and is considered a low growth stock. The company has a net profit margin of 10.40% and is more profitable than the average Communication Equipment player. MSI’s return on equity of -70.30% is worse than the Communication Equipment industry average.
Motorola Solutions, Inc. (MSI) pays a dividend of 1.88, which translates to dividend yield of 2.09% based on the current price. Stock has a payout ratio of 45.20%. According to this ratio, MSI should be able to continue making payouts at these levels. The company trades at a free cash flow yield of 0.28 and has a P/E of 23.71. Compared to the average company in the 12.56 space, MSI is relatively expensive. The average analyst recommendation for MSI is 2.30, or a buy.
Motorola Solutions, Inc. insiders have sold a net of -63,653 shares during the past three months, which implies that the company’s top executives have been feeling bearish about the stock’s outlook. Finally, MSI’s beta of 0.32 indicates that the stock has an below average level of market risk.
Lumentum Holdings Inc. (NASDAQ:LITE) scores higher than Motorola Solutions, Inc. (NYSE:MSI) on 8 of the 13 measures compared between the two companies. LITE has the better fundamentals, scoring higher on growth, efficiency and return metrics. LITE has better insider activity and sentiment signals.