Critical Review: ARM (NASDAQ:ARM) versus Viavi Solutions (NASDAQ:VIAV)

ARM (NASDAQ:ARM) and Viavi Solutions (NASDAQ:VIAV) are both business services companies, but which is the better stock? We will contrast the two businesses based on the strength of their profitability, analyst recommendations, institutional ownership, earnings, risk, dividends and valuation.

Valuation & Earnings

This table compares ARM and Viavi Solutions’ top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
ARM	$2.70 billion	46.52	N/A	N/A	N/A
Viavi Solutions	$1.01 billion	1.83	$25.50 million	$0.02	416.00

Viavi Solutions has lower revenue, but higher earnings than ARM.

Institutional and Insider Ownership

7.5% of ARM shares are held by institutional investors. Comparatively, 95.5% of Viavi Solutions shares are held by institutional investors. 1.8% of Viavi Solutions shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company will outperform the market over the long term.

Analyst Recommendations

This is a breakdown of recent ratings and target prices for ARM and Viavi Solutions, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
ARM	1	11	13	0	2.48
Viavi Solutions	0	2	4	0	2.67

Viavi Solutions has a consensus target price of $13.17, indicating a potential upside of 58.25%. Given Viavi Solutions’ stronger consensus rating and higher probable upside, analysts clearly believe Viavi Solutions is more favorable than ARM.

Profitability

This table compares ARM and Viavi Solutions’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
ARM	N/A	17.51%	11.49%
Viavi Solutions	0.49%	5.38%	2.01%

About ARM

Arm Holdings plc architects, develops, and licenses central processing unit products and related technologies for semiconductor companies and original equipment manufacturers rely on to develop products. It offers microprocessors, systems intellectual property (IPs), graphics processing units, physical IP and associated systems IPs, software, tools, and other related services. Its products are used in various markets, such as automotive, computing infrastructure, consumer technologies, and Internet of things. The company operates in the United States, the People's Republic of China, Taiwan, South Korea, and internationally. The company was founded in 1990 and is headquartered in Cambridge, the United Kingdom. Arm Holdings plc operates as a subsidiary of Kronos II LLC.

About Viavi Solutions

Viavi Solutions Inc. provides network test, monitoring, and assurance solutions for communications service providers, hyperscalers, network equipment manufacturers, original equipment manufacturers, government, and avionics customers in the Americas, the Asia-Pacific, Europe, the Middle East, and Africa. The company operates through three segments: Network Enablement (NE), Service Enablement (SE), and Optical Security and Performance Products (OSP). The NE segment offers testing solutions that access the network to perform build-out and maintenance tasks. Its solutions include instruments, software, and services to design, build, activate, certify, troubleshoot, and optimize networks; and test and measurement instrumentation for communication and safety. It also offers support and professional services, such as repair, calibration, software support, and technical assistance for the products; and system integration projects, including project management, installation, and implementation, as well as product and technology training, and consulting services. The SE segment provides embedded systems and enterprise performance management solutions for communication service providers, enterprises, and cloud operators with visibility into network, service, and application data. Its solutions include instruments, microprobes, and software, which monitor, collect, and analyze network data to reveal the actual customer experience and to identify opportunities for new revenue streams and network optimization. The OSP segment offers optical products for anti-counterfeiting, consumer and industrial, government, automotive, and industrial markets. The company was formerly known as JDS Uniphase Corporation. Viavi Solutions Inc. was founded in 1923 and is headquartered in Chandler, Arizona.