Marvell Technology Inc (MRVL, Financial) has recently experienced a daily loss of 3.72%, yet it boasts a 3-month gain of 20.93%. Despite these fluctuations, the company has reported a Loss Per Share of $1.08. This raises a critical question for value investors: Is Marvell Technology modestly overvalued? In the following analysis, we delve into the company's valuation to provide a clear answer.
Company Introduction
Marvell Technology Inc (MRVL, Financial) is a leading fabless chip designer, holding a strong position in the wired networking sector. With a significant presence in various end markets, including data centers, carriers, enterprise, automotive, and consumer segments, Marvell Technology specializes in processors, optical and copper transceivers, switches, and storage controllers. The company's current stock price of $69.1 reflects a market cap of $59.70 billion, which, when juxtaposed with the GF Value of $59.91, suggests a potential overvaluation. This initial comparison sets the stage for an in-depth evaluation of Marvell Technology's fair market value.
Summarize GF Value
The GF Value is a proprietary metric that estimates the intrinsic value of a stock by considering historical trading multiples, an adjustment factor based on past performance and growth, and future business performance projections. According to this measure, Marvell Technology (MRVL, Financial) appears modestly overvalued. The GF Value Line suggests a fair trading value, and deviations from this benchmark can imply overvaluation or undervaluation, influencing future returns. Given Marvell Technology's market cap of $59.70 billion and its current stock price, the company's valuation warrants caution, as its long-term stock return may fall short of its business growth.
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Financial Strength
Assessing the financial strength of a company is crucial before investing. Marvell Technology's cash-to-debt ratio of 0.23 is lower than 88.16% of companies in the Semiconductors industry, posing a higher risk of permanent loss. With a financial strength rating of 6 out of 10, Marvell Technology's financial health is considered fair. Below is a graphical representation of the company's debt and cash over recent years.
Profitability and Growth
Investing in profitable companies usually entails less risk. Marvell Technology has been profitable in 4 out of the past 10 years, with a revenue of $5.50 billion and a Loss Per Share of $1.08 over the past 12 months. However, its operating margin of -7.93% is lower than 76.25% of its peers in the Semiconductors industry. The company's profitability is ranked as fair.
Growth is a vital indicator of a company's valuation. Marvell Technology's 3-year average revenue growth rate surpasses 55.76% of companies in its industry. Moreover, its 3-year average EBITDA growth rate of 19.4% is higher than 52.62% of its peers, indicating a strong growth potential.
ROIC vs WACC
A comparison between Return on Invested Capital (ROIC) and Weighted Average Cost of Capital (WACC) can provide insight into a company's profitability. Ideally, ROIC should exceed WACC. For Marvell Technology, the ROIC is -2.68, which is less than its WACC of 14.47, suggesting that the company is not generating sufficient returns on its investments.
Conclusion
Overall, Marvell Technology (MRVL, Financial) is considered modestly overvalued. The company's financial condition and profitability are rated as fair, and its growth ranks competitively within the Semiconductors industry. For a more comprehensive understanding of Marvell Technology's financials, interested investors can explore its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
