Analyzing TranSwitch (OTCMKTS:TXCCQ) and ARM (NASDAQ:ARM)

ARM (NASDAQ:ARM) and TranSwitch (OTCMKTS:TXCCQ) are both computer and technology companies, but which is the superior business? We will compare the two companies based on the strength of their profitability, valuation, earnings, institutional ownership, analyst recommendations, risk and dividends.

Insider & Institutional Ownership

7.5% of ARM shares are held by institutional investors. 6.3% of TranSwitch shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Valuation and Earnings

This table compares ARM and TranSwitch”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
ARM	$4.01 billion	30.60	$792.00 million	$0.78	148.81
TranSwitch	N/A	N/A	N/A	N/A	N/A

ARM has higher revenue and earnings than TranSwitch.

Volatility and Risk

ARM has a beta of 4.34, indicating that its stock price is 334% more volatile than the S&P 500. Comparatively, TranSwitch has a beta of 22.99, indicating that its stock price is 2,199% more volatile than the S&P 500.

Profitability

This table compares ARM and TranSwitch’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%
TranSwitch	N/A	N/A	N/A

Analyst Recommendations

This is a breakdown of current ratings and target prices for ARM and TranSwitch, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
ARM	1	8	16	0	2.60
TranSwitch	0	0	0	0	0.00

ARM currently has a consensus target price of $172.14, indicating a potential upside of 48.31%. Given ARM’s stronger consensus rating and higher probable upside, equities research analysts plainly believe ARM is more favorable than TranSwitch.

Summary

ARM beats TranSwitch on 8 of the 10 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 TranSwitch

TranSwitch Corporation, together with its subsidiaries, designs, develops, and supplies integrated circuit and intellectual property solutions that provide functionality for voice, data, and video communications equipment for the customer premises and network infrastructure markets. The company provides integrated multi-core network processor system-on-a-chip (SoC) solutions for fixed, 3G and 4G mobile, VoIP, and multimedia applications. It offers converged network infrastructure products, including infrastructure VoIP processors for wire-line and wireless carrier equipment; access VoIP processors; and EoS/EoPDH mappers and framers for carriers to transport data traffic over SONET, SDH, and PDH networks. The company also offers broadband customer premises equipment, such as connectivity solutions comprising HDMI, DisplayPort, MHL, HDP, Ethernet IP cores, and MHDP transceivers for consumer electronics, home network equipment, and industrial and automotive applications; and multi-service SoCs for customer premises equipment that support telephone voice, fax, and routing functionality over broadband access networks. TranSwitch Corporation sells its products to public network system original equipment manufacturers (OEMs), WAN and LAN equipment OEMs, Internet-oriented OEMs, and communications test and performance measurement equipment OEMs; and government, universities, and private laboratories. The company offers its products directly in North America, Taiwan, China, Japan, Korea, and Europe, as well as through a network of distributors in North America, Asia, and Europe. TranSwitch Corporation was founded in 1988 and is headquartered in Shelton, Connecticut. On November 21, 2013, TranSwitch Corporation filed a voluntary petition for liquidation under Chapter 7 in the U.S. Bankruptcy Court for the District of Connecticut.