Sierra Wireless (NASDAQ:SWIR) and Cisco (NASDAQ:CSCO) are often considered top plays on the Internet of Things (IoT), which connects various devices to each other and the cloud. Research firm IHS expects the total number of IoT devices to surge from 15.4 billion in 2015 to 30.7 billion in 2020.

Sierra is considered the top "pure play" on that market because it's the world's top manufacturer of 2G, 3G, and 4G embedded modules and gateways, which are used for M2M (machine-to-machine) communications.

Cisco is the world's largest manufacturer of network routers and switches. It bundles that hardware with a growing portfolio of security, collaboration, wireless, and unified computing solutions.

A graphical depiction of the Internet of Things.

Image source: Getty Images.

Sierra rallied more than 40% this year as it ended a streak of top line declines with three straight quarters of double-digit annual growth. Cisco advanced 12%, but its revenue growth stayed stagnant as its higher-growth businesses failed to offset softer demand for routers and switches.

Looking ahead, will Sierra continue to outperform Cisco? Or will Cisco climb as Sierra runs out of steam?

Which company is growing faster?

Sierra's revenue rose just 2% in 2016 due to softer demand from the OEM customers which account for over 80% of its revenues. However, OEM revenues rebounded sharply over the past three quarters, and analysts expect Sierra to post 11% sales growth this year.

A graphical depiction of the Internet of Things.

Image source: Getty Images.

Sierra attributes that recovery to robust demand across the automotive, energy, networking, payment, and mobile computing markets. Its recent acquisition of the assets of GlobalTop Technology's GNSS (global navigation satellite system) business further strengthened the OEM businesses.

Sierra relies heavily on acquisitions to expand its moat and grow its top line -- it acquired smaller wireless players like AnyData, Maingate, Mobiquithings, GenX Mobile, and Numerex over the past few years.

Cisco's revenue fell 3% last year (2% after excluding the sale of its set-top box business) due to weak sales of its routers andswitches. Cisco has been losing share in both markets to rivals like Juniper Networks, Arista Networks (NYSE:ANET), and Huawei. Arista is a major thorn in Cisco's side, because its switches and open source software are optimized for "white box" networks which use cheaper generic hardware.

Cisco bulls had hoped that its growing security and wireless businesses would offset the weakness of its routers and switches, but those units are still too small to truly move the needle. As a result, analysts expect Cisco's revenue to stay roughly flat this year.

Which company has better earnings growth?

Sierra has struggled with growing its profits in the past, and its earnings dropped 14% last year on weak OEM demand and high acquisition-related expenses. But looking ahead, analysts expect Sierra's earnings to surge 47% this year as OEM orders accelerate and it lowers production costs with its scaled up operations.

Cisco's adjusted earnings (which exclude the set-top box unit's sale) grew just 1% last year, even after spending $3.7 billion on buybacks. That situation won't improve anytime soon, with analysts anticipating less than 2% growth this year.

Sierra has more promising earnings growth than Cisco, but investors should note that Sierra's operating margins remain much lower than Cisco's -- so the former remains a riskier play than the latter.

SWIR Operating Margin (TTM) Chart

Source: YCharts

Comparing the dividends and valuations

Sierra doesn't pay a dividend. Cisco pays a forward yield of 3.5%, which is supported by a low payout ratio of 58%. Cisco has raised that payout annually for six straight years.

Sierra trades at 35 times earnings, which is higher than the industry average of 33 for communication equipment makers. But its forward P/E of 19 looks fairly reasonable relative to its earnings growth rate. Cisco trades at just 18 times trailing earnings and 14 times forward earnings.

The winner: Sierra Wireless

I own shares of Cisco, and I haven't been thrilled with its performance. I don't plan to sell it anytime soon, since its high dividend and low valuation make it a good income play, but I think Sierra Wireless is a better pick for investors at current prices.

Sierra has better top and bottom line growth, faces fewer headwinds, and would be more easily boosted by the growth of the IoT market than Cisco, which remains weighed down by sluggish sales of routers and switches.

Leo Sun owns shares of Cisco Systems. The Motley Fool owns shares of and recommends Arista Networks and Sierra Wireless. The Motley Fool recommends Cisco Systems. The Motley Fool has a disclosure policy.