Financial Analysis: ARM (ARM) versus The Competition

ARM (NASDAQ:ARM) is one of 174 publicly-traded companies in the “Semiconductors & related devices” industry, but how does it contrast to its competitors? We will compare ARM to similar businesses based on the strength of its analyst recommendations, risk, valuation, profitability, institutional ownership, dividends and earnings.

Profitability

This table compares ARM and its competitors’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
ARM	18.13%	14.14%	9.85%
ARM Competitors	-154.81%	-39.54%	-6.99%

Risk and Volatility

ARM has a beta of 5.4, indicating that its share price is 440% more volatile than the S&P 500. Comparatively, ARM’s competitors have a beta of 1.72, indicating that their average share price is 72% more volatile than the S&P 500.

Valuation and Earnings

This table compares ARM and its competitors revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Net Income	Price/Earnings Ratio
ARM	$3.23 billion	$306.00 million	245.80
ARM Competitors	$20.60 billion	$806.07 million	18.30

ARM’s competitors have higher revenue and earnings than ARM. ARM is trading at a higher price-to-earnings ratio than its competitors, indicating that it is currently more expensive than other companies in its industry.

Institutional and Insider Ownership

7.5% of ARM shares are held by institutional investors. Comparatively, 56.8% of shares of all “Semiconductors & related devices” companies are held by institutional investors. 10.6% of shares of all “Semiconductors & related devices” companies are held by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Analyst Ratings

This is a breakdown of recent ratings and price targets for ARM and its competitors, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
ARM	2	6	17	1	2.65
ARM Competitors	2514	9807	19247	681	2.56

ARM currently has a consensus price target of $145.57, indicating a potential downside of 1.29%. As a group, “Semiconductors & related devices” companies have a potential upside of 656.86%. Given ARM’s competitors higher probable upside, analysts plainly believe ARM has less favorable growth aspects than its competitors.

Summary

ARM beats its competitors on 8 of the 13 factors compared.

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.