InterDigital (IDCC) vs. Lumentum Holdings (LITEV) Critical Analysis

InterDigital (NASDAQ: IDCC) and Lumentum Holdings (NASDAQ:LITEV) are both mid-cap computer and technology companies, but which is the better business? We will compare the two businesses based on the strength of their risk, valuation, institutional ownership, earnings, dividends, profitability and analyst recommendations.

Analyst Ratings

This is a summary of current ratings and recommmendations for InterDigital and Lumentum Holdings, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
InterDigital 0 2 2 0 2.50
Lumentum Holdings 0 0 0 0 N/A

InterDigital currently has a consensus target price of $91.33, suggesting a potential upside of 26.68%. Given InterDigital’s higher probable upside, research analysts plainly believe InterDigital is more favorable than Lumentum Holdings.

Insider & Institutional Ownership

74.8% of InterDigital shares are owned by institutional investors. 1.9% of InterDigital shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company will outperform the market over the long term.

Dividends

InterDigital pays an annual dividend of $1.40 per share and has a dividend yield of 1.9%. Lumentum Holdings does not pay a dividend. InterDigital pays out 19.3% of its earnings in the form of a dividend.

Valuation and Earnings

This table compares InterDigital and Lumentum Holdings’ gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio NetIncome Earnings Per Share Price/Earnings Ratio
InterDigital $665.85 million 3.76 $309.00 million $7.24 9.96
Lumentum Holdings N/A N/A N/A ($1.53) -37.68

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

Profitability

This table compares InterDigital and Lumentum Holdings’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
InterDigital 42.94% 32.77% 14.02%
Lumentum Holdings 2.92% 4.39% 2.30%

Summary

InterDigital beats Lumentum Holdings on 10 of the 11 factors compared between the two stocks.

InterDigital Company Profile

InterDigital, Inc. designs and develops technologies for wireless communications. The Company is focused on three technology areas: cellular wireless technology, Internet of things (IoT) technology, and, through its Hillcrest Laboratories, Inc. (Hillcrest Labs) subsidiary, sensor and sensor fusion technology. It offers a range of technologies that are used in digital cellular and wireless products and networks, including second generation (2G), third generation (3G), fourth generation (4G) and IEEE 802-related products and networks. Products incorporating its inventions include mobile devices, such as cellular phones, tablets, notebook computers and wireless personal digital assistants; wireless infrastructure equipment, such as base stations; components, dongles and modules for wireless devices, and IoT devices and software platforms. The Company is developing a range of technologies in the areas of video compression and delivery, security, analytics, and other areas.

Lumentum Holdings Company Profile

Lumentum Holdings Inc. is a provider of optical and photonic products for a range of end market applications, including data communications (Datacom) and telecommunications (Telecom) networking and commercial lasers (commercial lasers) for manufacturing, inspection and life-science applications. The Company operates in two segments: Optical Communications (OpComms) and Commercial Lasers (Lasers). The Company’s OpComms products include a range of components, modules and subsystems to support and maintain customers in its two primary markets: Telecom and Datacom. The Company’s Lasers products serve customers in markets and applications, such as manufacturing, biotechnology, graphics and imaging, remote sensing, and precision machining, such as drilling in printed circuit boards, wafer singulation and solar cell scribing. The Company’s customers include original equipment manufacturers (OEMs).

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