Critical Comparison: IRIDEX (NASDAQ:IRIX) versus Digirad (DRAD)

IRIDEX (NASDAQ: IRIX) and Digirad (NASDAQ:DRAD) are both small-cap computer and technology companies, but which is the superior business? We will contrast the two businesses based on the strength of their earnings, profitability, institutional ownership, valuation, dividends, analyst recommendations and risk.

Dividends

Digirad pays an annual dividend of $0.22 per share and has a dividend yield of 9.8%. IRIDEX does not pay a dividend. Digirad pays out -37.3% of its earnings in the form of a dividend.

Profitability

This table compares IRIDEX and Digirad’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
IRIDEX -42.22% -23.21% -19.03%
Digirad -9.93% 9.82% 6.02%

Analyst Recommendations

This is a breakdown of recent ratings for IRIDEX and Digirad, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
IRIDEX 0 0 1 0 3.00
Digirad 0 0 1 0 3.00

IRIDEX currently has a consensus target price of $13.00, indicating a potential upside of 69.05%. Digirad has a consensus target price of $6.00, indicating a potential upside of 166.67%. Given Digirad’s higher probable upside, analysts plainly believe Digirad is more favorable than IRIDEX.

Institutional and Insider Ownership

49.3% of IRIDEX shares are owned by institutional investors. Comparatively, 53.1% of Digirad shares are owned by institutional investors. 5.0% of IRIDEX shares are owned by company insiders. Comparatively, 11.9% of Digirad shares are owned 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.

Volatility and Risk

IRIDEX has a beta of 1.31, suggesting that its stock price is 31% more volatile than the S&P 500. Comparatively, Digirad has a beta of 1.9, suggesting that its stock price is 90% more volatile than the S&P 500.

Valuation & Earnings

This table compares IRIDEX and Digirad’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
IRIDEX $46.16 million 1.93 -$11.71 million ($1.71) -4.50
Digirad $125.47 million 0.36 $14.30 million ($0.59) -3.81

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

Summary

Digirad beats IRIDEX on 12 of the 13 factors compared between the two stocks.

IRIDEX Company Profile

IRIDEX Corporation is a provider of therapeutic based laser consoles, delivery devices and consumable instrumentation used to treat sight-threatening eye diseases in ophthalmology. The Company operates through ophthalmology segment. Its ophthalmology products consist of laser consoles, delivery devices and consumable instrumentation, including laser probes, and are used in the treatment of serious eye diseases, including the over three causes of irreversible blindness, such as diabetic retinopathy, glaucoma and age-related macular degeneration (AMD). In addition, the Company’s ophthalmology products are often used in vitrectomy procedures (used to treat proliferative diabetic retinopathy, macular holes, retinal tears and detachments), which are generally performed in the operating room and require a consumable single use intraocular laser probe (EndoProbe) to deliver light to the back of the eye together with other instrumentation.

Digirad Company Profile

Digirad Corporation provides healthcare solutions. The Company’s segments include Diagnostic Services, Mobile Healthcare, Diagnostic Imaging and Medical Device Sales and Services. Through Diagnostic Services, the Company offers an imaging services program as an alternative to purchasing equipment or outsourcing the procedures to another physician or imaging center. Through Mobile Healthcare segment, the Company provides contract sales services and diagnostic imaging services. Through Diagnostic Imaging segment, the Company sells its internally developed solid-state gamma camera imaging systems and camera maintenance contracts. Through Medical Device Sales and Services segment, the Company provides contract sales services, as well as warranty and post-warranty services, under contract with Philips Healthcare within a defined region in the upper Midwest region of the United States.

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