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.
Stone House Capital Partners returned 4.1% for September, bringing its year-to-date return to 72% net. The S&P 500 is up 14.3% for the first nine months of the year. Q3 2021 hedge fund letters, conferences and more Stone House follows a value-based, long-long term and concentrated investment approach focusing on companies rather than the market Read More
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).
Is Marvell less cost conscious than its peers? Find out with the complete fundamental analysis!