Marvell Technology: A Look at The Company Versus Competitors

Marvell Technology: A Look at The Company Versus Competitors

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.

Marvell Technology: A Look at The Company Versus Competitors

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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
Revenues 807.1 734.4 775.3 780.9 816.1
Revenue Growth % 9.9 (5.3) (0.7) (4.3) 2.5
Net Income 61.8 53.2 50.2 68.8 93.1
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.

Quarterly Accruals Trend for Marvell Technology (NASDAQ:MRVL)Annual Accruals Trend for Marvell Technology (NASDAQ:MRVL)

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).

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