Financial Analysis: Outset Medical (NASDAQ:OM) versus Precision Optics (NASDAQ:POCI)

Precision Optics (NASDAQ:POCI) and Outset Medical (NASDAQ:OM) are both small-cap medical companies, but which is the superior business? We will contrast the two companies based on the strength of their earnings, dividends, analyst recommendations, profitability, risk, institutional ownership and valuation.

Insider and Institutional Ownership

13.7% of Precision Optics shares are held by institutional investors. 16.3% of Precision Optics shares are held by company insiders. Comparatively, 3.5% of Outset Medical shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Profitability

This table compares Precision Optics and Outset Medical’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Precision Optics	-8.43%	-19.07%	-11.81%
Outset Medical	-136.72%	-143.52%	-48.89%

Valuation and Earnings

This table compares Precision Optics and Outset Medical”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Precision Optics	$21.05 million	1.66	-$140,000.00	($0.28)	-20.50
Outset Medical	$116.43 million	0.27	-$172.80 million	($3.38)	-0.18

Precision Optics has higher earnings, but lower revenue than Outset Medical. Precision Optics is trading at a lower price-to-earnings ratio than Outset Medical, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a breakdown of current ratings and recommmendations for Precision Optics and Outset Medical, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Precision Optics	0	0	0	0	N/A
Outset Medical	1	2	4	0	2.43

Outset Medical has a consensus target price of $4.64, indicating a potential upside of 657.28%. Given Outset Medical’s higher probable upside, analysts plainly believe Outset Medical is more favorable than Precision Optics.

Volatility and Risk

Precision Optics has a beta of 0.16, indicating that its stock price is 84% less volatile than the S&P 500. Comparatively, Outset Medical has a beta of 1.92, indicating that its stock price is 92% more volatile than the S&P 500.

Summary

Precision Optics beats Outset Medical on 8 of the 13 factors compared between the two stocks.

About Precision Optics

Precision Optics Corporation, Inc. designs, develops, manufactures, and sells specialized optical and illumination systems and related components primarily in the United States and the European Economic Area. It offers medical instrumentation products, including endoscopes and endocouplers, as well as other custom imaging and illumination products, such as Microprecision lenses and micro medical cameras, and 3D endoscopes for use in minimally invasive surgical procedures by hospitals and physicians. The company also provides components and assemblies for industrial and military use. It markets its products to medical device companies. The company was incorporated in 1982 and is based in Gardner, Massachusetts.

About Outset Medical

Outset Medical, Inc., a medical technology company, engages in the development of a hemodialysis system for hemodialysis in the United States. The company offers Tablo Hemodialysis System, a compact console with integrated water purification, on-demand dialysate production, and software and connectivity capabilities for dialysis care in acute and home settings; and manufactures, supports, and distributes for Tablo console, Tablo cartridge, and other consumables. It also provides Tablo Data Ecosystem, including TabloHub, a customer-facing portal; MyTablo, a patient-facing portal; and TabloDash, an internal data analytics platform. The company was formerly known as Home Dialysis Plus, Ltd. and changed its name to Outset Medical, Inc. in January 2015. Outset Medical, Inc. was incorporated in 2003 and is headquartered in San Jose, California.