Communications Systems (JCS) and Clearfield (CLFD) Critical Analysis

Communications Systems (NASDAQ: JCS) and Clearfield (NASDAQ:CLFD) are both small-cap computer and technology companies, but which is the superior business? We will compare the two businesses based on the strength of their analyst recommendations, earnings, dividends, risk, institutional ownership, profitability and valuation.

Dividends

Communications Systems pays an annual dividend of $0.16 per share and has a dividend yield of 3.5%. Clearfield does not pay a dividend. Communications Systems pays out -16.3% of its earnings in the form of a dividend.

Institutional & Insider Ownership

31.8% of Communications Systems shares are held by institutional investors. Comparatively, 27.4% of Clearfield shares are held by institutional investors. 17.5% of Communications Systems shares are held by insiders. Comparatively, 18.3% of Clearfield shares are held by 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.

Risk and Volatility

Communications Systems has a beta of 1.06, indicating that its stock price is 6% more volatile than the S&P 500. Comparatively, Clearfield has a beta of 1.28, indicating that its stock price is 28% more volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of current ratings and price targets for Communications Systems and Clearfield, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Communications Systems 0 0 1 0 3.00
Clearfield 0 0 1 0 3.00

Communications Systems presently has a consensus target price of $6.00, indicating a potential upside of 31.58%. Clearfield has a consensus target price of $15.00, indicating a potential upside of 8.30%. Given Communications Systems’ higher possible upside, analysts plainly believe Communications Systems is more favorable than Clearfield.

Profitability

This table compares Communications Systems and Clearfield’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Communications Systems -9.55% -14.44% -12.11%
Clearfield 6.87% 8.12% 7.51%

Earnings & Valuation

This table compares Communications Systems and Clearfield’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Communications Systems $91.24 million 0.45 -$1.87 million ($0.98) -4.65
Clearfield $76.58 million 2.52 $9.17 million $0.39 35.51

Clearfield has higher revenue, but lower earnings than Communications Systems. Communications Systems is trading at a lower price-to-earnings ratio than Clearfield, indicating that it is currently the more affordable of the two stocks.

Summary

Clearfield beats Communications Systems on 8 of the 13 factors compared between the two stocks.

About Communications Systems

Communications Systems, Inc. (CSI) operates directly and through its subsidiaries located in the United States, Costa Rica and the United Kingdom. The Company operates through three segments: Suttle, Transition Networks and JDL Technologies (JDL). The Company provides physical connectivity infrastructure products and services for global deployments of broadband networks. The Company is principally engaged through its subsidiary and business unit, Suttle, Inc., in the manufacture and sale of connectivity infrastructure products for broadband and voice communications, and through its another subsidiary and business unit, Transition Networks, Inc., in the manufacture and sale of core media conversion products for broadband networks. Through its JDL Technologies, Inc. subsidiary and business unit, CSI provides information technology (IT) solutions, including network design, computer infrastructure installations, IT service management, network security and network operation services.

About Clearfield

Clearfield, Inc. manufactures, markets and sells fiber management and enclosure platform that consolidates, distributes and protects fiber as it moves from the inside plant to the outside plant and all the way to the home, business and cell site. The Company’s products include Clearview Cassette, which is the building block of its product platform; Connectivity and Optical Components; FieldSmart, which is a series of panels, cabinets, wall boxes and other enclosures that house the Clearview components; FieldShield, which is a fiber delivery method for broadband deployment; CraftSmart, which is a line of optical protection field enclosures, and Cable Assemblies. Its products are sold across broadband service providers, including traditional telephone companies, competitive local exchange carriers, multiple service operators (cable television), wireless service providers, and municipal-owned utilities that utilize fiber in their service offerings to businesses and consumers.

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