Is Qorvo (QRVO) Undervalued Despite Its Analyst Rating?

Qorvo may be undervalued, but the 23 analysts following the company give it an rating of hold. Their target prices range from $85.0 to $136.0 per share, for an average of $107.43. At today's price of $97.54, Qorvo is trading -9.21% away from its average target price, suggesting there is an analyst consensus of some upside potential for the stock.

Qorvo is an American semiconductor company that designs, manufactures, and supplies radio-frequency systems for applications that drive wireless and broadband communications, as well as foundry services.. The large-cap Industrials company is based in Greensboro, NC

Qorvo has a trailing twelve month P/E ratio of 22.58, compared to an average of 20.49 for the Industrials sector. Based on its EPS guidance of 4.38, the company has a forward P/E ratio of 22.27.

The average annual growth rate of the company's historical and projected earnings per share is 145.6% — a good portion of which may be attributed to share buy backs, which reduce the numbers of shares outstanding. On this basis, the company's PEG ratio is 0.16. However, this growth rate is probably not sustainable. In its place we will use the broader market's estimated 5-year EPS growth rate of 13.05%, which gives us a PEG ratio of 1.73. This suggests Qorvo may be overpriced in terms of a cautious outlook on its earnings growth potential.

Furthermore, the market is potentially undervaluing Qorvo in terms of its book value because its P/B ratio is 2.368. In comparison, the sector average P/B ratio is 3.78. The company's shares are currently 59.54% above their Graham number, which suggests that they are not trading at a fair value in terms of earnings and net assets.

2018-03-31 2019-03-31 2020-03-31 2021-03-31
Revenue (MM) $3,090 $3,239 $4,015 $4,646
Revenue Growth n/a 4.82% 23.96% 15.7%
Gross Margins 38.67% 40.81% 46.91% 49.21%
Gross Margins Growth n/a 5.53% 14.95% 4.9%
Operating Margins 7.0% 13.07% 22.58% 26.39%
Operating Margins Growth n/a 86.71% 72.76% 16.87%
Earnings Per Share $1.12 $2.92 $6.52 $9.72
EPS Growth n/a 160.71% 123.29% 49.08%
Diluted Shares (MM) 119 115 113 106
Free Cash Flow (MM) $583 $589 $782 $1,115
FCF Growth n/a 1.16% 32.59% 42.65%
Capital Expenditures (MM) $270 $221 $164 $187
LT Debt to Equity 0.21 0.37 0.38 0.45
The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.