Critical Review: Electro-Sensors (NASDAQ:ELSE) versus Frequency Electronics (NASDAQ:FEIM)

Electro-Sensors (NASDAQ:ELSE) and Frequency Electronics (NASDAQ:FEIM) are both small-cap computer and technology 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.

Volatility and Risk

Electro-Sensors has a beta of 0.08, suggesting that its share price is 92% less volatile than the S&P 500. Comparatively, Frequency Electronics has a beta of 0.45, suggesting that its share price is 55% less volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of recent ratings and target prices for Electro-Sensors and Frequency Electronics, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Electro-Sensors	0	1	0	0	2.00
Frequency Electronics	0	1	1	0	2.50

Frequency Electronics has a consensus target price of $43.67, indicating a potential downside of 15.28%. Given Frequency Electronics’ stronger consensus rating and higher probable upside, analysts clearly believe Frequency Electronics is more favorable than Electro-Sensors.

Institutional and Insider Ownership

11.7% of Electro-Sensors shares are held by institutional investors. Comparatively, 58.6% of Frequency Electronics shares are held by institutional investors. 13.3% of Electro-Sensors shares are held by company insiders. Comparatively, 28.0% of Frequency Electronics 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.

Valuation and Earnings

This table compares Electro-Sensors and Frequency Electronics”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Electro-Sensors	$10.14 million	2.65	$310,000.00	$0.09	84.61
Frequency Electronics	$69.81 million	7.26	$23.69 million	$0.75	68.72

Frequency Electronics has higher revenue and earnings than Electro-Sensors. Frequency Electronics is trading at a lower price-to-earnings ratio than Electro-Sensors, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Electro-Sensors and Frequency Electronics’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Electro-Sensors	3.02%	2.10%	1.98%
Frequency Electronics	10.78%	12.69%	7.84%

Summary

Frequency Electronics beats Electro-Sensors on 13 of the 14 factors compared between the two stocks.

About Electro-Sensors

Electro-Sensors, Inc. engages in the manufacture and selling of industrial production monitoring and process control systems. Its products include shaft speed witches; wireless hazard monitoring; temperature sensor; slide gate and angle position; bearing sensors and belt alignment; and motor drive control. The company was founded by James P. Slattery in 1965 and is headquartered in Minnetonka, MN.

About Frequency Electronics

Frequency Electronics, Inc., together with its subsidiaries, engages in designing, development, and manufacturing of precision time and frequency control products and components for microwave integrated circuit applications. It operates through two segments, FEI-NY and FEI-Zyfer. The FEI-NY segment offers precision time and frequency control products for communication satellites, terrestrial cellular telephone or other ground-based telecommunication stations; and other components and systems for the U.S. military; and provides design and technical support for satellite business. FEI-Zyfer segment offers global positioning system technologies to systems and subsystems for secure communications, both government and commercial, and other locator applications; and engages in sale and support of wireline telecommunications products, including US5G. It markets its products directly and through independent sales representative organizations located in the United States, Europe, and Asia. Frequency Electronics, Inc. was founded in 1961 and is headquartered in Mitchel Field, New York.