Qorvo Inc (QRVO, Financial) recently experienced a significant daily loss of 14.37%, contributing to a three-month decline of 8.05%. With a Loss Per Share of 0.73, investors are naturally questioning whether the stock is modestly undervalued. This article delves into Qorvo's valuation, encouraging a thorough analysis of its financial health and market position.
Company Overview
Qorvo represents the amalgamation of RF Micro Devices and TriQuint Semiconductor, which merged in January 2015. The company is a key player in the semiconductor industry, specializing in radio frequency solutions for advanced smartphones and a variety of other applications including wireless base stations and military technologies. Despite the recent downturn in its stock price to $95.81, Qorvo's market cap stands at $9.30 billion, with sales reaching $3.80 billion. The GF Value estimates Qorvo's fair value at $118.3, suggesting that the stock might be modestly undervalued.
Understanding GF Value
The GF Value is a proprietary measure calculated by GuruFocus. It factors in historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and projected future business performance. According to this metric, if Qorvo's stock price significantly deviates below this value, it suggests a potential undervaluation, promising higher future returns. Currently, the GF Value indicates that Qorvo's stock, at its present price, is modestly undervalued.
Financial Strength and Risks
Assessing a company's financial strength is crucial to mitigating risks of capital loss. Qorvo's cash-to-debt ratio stands at 0.52, which is lower than 75.23% of its peers in the semiconductor industry. This indicates a moderate risk in terms of financial structure. The company's overall financial strength is rated 6 out of 10 by GuruFocus, reflecting a fair status but with room for improvement.
Profitability and Growth Prospects
Qorvo has maintained profitability over 7 of the past 10 years, with a current operating margin of 2.43%, which is lower than 69.92% of its industry counterparts. The company's average annual revenue growth rate stands at 8.5%, positioning it better than 56.93% of its industry peers. However, its 3-year average EBITDA growth rate of -12.7% is a concern, indicating potential challenges in maintaining growth momentum.
Investment Returns: ROIC vs WACC
Evaluating Qorvo's value creation, the Return on Invested Capital (ROIC) is currently at -1.67, underperforming its Weighted Average Cost of Capital (WACC) of 11.88. This suggests that the company is not generating adequate returns on its investments, which could be a red flag for potential investors.
Conclusion
While Qorvo (QRVO, Financial) appears modestly undervalued according to the GF Value, the company faces several challenges in terms of profitability and growth. Investors should consider both the potential for long-term gains and the inherent risks. For further details on Qorvo's financial health, consider exploring 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.
