Marvell Technology Group Ltd. (NASDAQ:MRVL) recently reported preliminary financial results for the quarter ended 2013-07-31. The company’s management reported a 10% increase in revenues from the previous quarter in its Q2 2014 earnings call. According to InsiderMonkey, Marvell stock which has soared 78% is a small-cap pick for many hedge funds. Based on MRVL’s preliminary result we analyze the company relative to its competitors in the semiconductor space; we recently published an earnings analysis of NVIDIA Corporation.
Are Marvell’s returns Sustainable? Find out with our in-depth fundamental analysis.
The table below shows the preliminary results along with the recent trend for revenues, net income and returns for Marvell Technology Group Ltd. (NASDAQ:MRVL)
|Quarterly (USD million)||2013-07-31||2013-04-30||2013-01-31||2012-10-31||2012-07-31|
|Revenue Growth %||9.9||(5.3)||(0.7)||(4.3)||2.5|
|Net Income Growth %||16.2||6.1||(27.1)||(26.1)||(1.6)|
|Net Margin %||7.7||7.2||6.5||8.8||11.4|
|ROE % (Annualized)||5.7||4.8||4.4||5.8||7.7|
|ROA % (Annualized)||4.8||4.1||3.7||5.0||6.6|
The Market Sees Faster Growth for MRVL
While Marvell’s revenues growth has been around the peer median in recent years (4.1% vs. 4.8% respectively for the past three years), the market gives its shares a higher than peer median PE ratio of 27.7. The market seems to see faster growth ahead.
Is Marvell Technology Group Under-investing?
The company’s annualized rate of change in capital of 0.5% over the past three years is less than its peer median of 13.7%. This investment has generated a peer median return on capital of 12.1% averaged over the same three years. The median return on capital investment on a relatively lower investment suggests that the company is under investing.
Earnings Quality: Possible overstatement of reported net income
Marvell’s reported net income margin for the last twelve months is around the peer median (7.6% vs. peer median of 7.8%). However, the company has also recorded a relatively low level of accruals (9.0% vs. peer median of 12.2%) which suggests possible overstatement of its reported net income.
The company’s accruals over the last twelve months are positive suggesting a buildup of reserves. But this level of accruals is less than the peer median — which suggests that while MRVL is building reserves, it is doing so in a relatively modest manner compared to its peers.
Peers used for Marvell Technology earnings analysis
Intel Corporation (NASDAQ:INTC), Texas Instruments Incorporated (NASDAQ:TXN), Broadcom Corporation (NASDAQ:BRCM), Linear Technology Corporation (NASDAQ:LLTC), NVIDIA Corporation (NASDAQ:NVDA), STMicroelectronics N.V. (NYSE:STM), LSI Corp (NASDAQ:LSI), ASM International NV (NASDAQ:ASMI), Cypress Semiconductor Corporation (NASDAQ:CY) and PMC-Sierra Inc (NASDAQ:PMCS).