We've been asking ourselves recently if the market has placed a fair valuation on Marvell Technology. Let's dive into some of the fundamental values of this large-cap Technology company to determine if there might be an opportunity here for value-minded investors.
Marvell Technology Has an Attractive P/B Ratio but a Worrisome P/E Ratio:
Marvell Technology, Inc., together with its subsidiaries, provides data infrastructure semiconductor solutions, spanning the data center core to network edge. The company belongs to the Technology sector, which has an average price to earnings (P/E) ratio of 35.0 and an average price to book (P/B) ratio of 7.92. In contrast, Marvell Technology has a trailing 12 month P/E ratio of -78.2 and a P/B ratio of 2.89.
Marvell Technology's PEG ratio is 2.72, which shows that the stock is probably overvalued in terms of its estimated growth. For reference, a PEG ratio near or below 1 is a potential signal that a company is undervalued.
The Business Is Unprofitable and Its Balance Sheet Is Highly Leveraged:
| 2021 | 2022 | 2023 | |
|---|---|---|---|
| Revenue (MM) | $2,969 | $4,462 | $5,920 |
| Revenue Growth | n/a | 50.3% | 32.66% |
| Gross Margins | 41% | 46% | 50% |
| Operating Margins | -9% | -8% | 4% |
| Net Margins | -9% | -9% | -3% |
| Net Income (MM) | -$277 | -$421 | -$164 |
| Net Interest Expense (MM) | $69 | $139 | $171 |
| Depreciation & Amort. (MM) | $198 | $266 | $305 |
| Earnings Per Share | -$0.41 | -$0.53 | -$0.19 |
| EPS Growth | n/a | -29.27% | 64.15% |
| Diluted Shares (MM) | 669 | 797 | 851 |
| Free Cash Flow (MM) | $710 | $650 | $1,083 |
| Capital Expenditures (MM) | $107 | $169 | $206 |
| Current Ratio | 1.81 | 1.31 | 1.03 |
| Long Term Debt (MM) | $4,557 | $3,928 | $3,134 |
| Net Debt / EBITDA | -64.96 | -46.31 | 8.07 |
Marvell Technology has slimmer gross margins than its peers, consistently negative margins with a positive growth rate, and a highly leveraged balance sheet. On the other hand, the company benefits from growing revenues and increasing reinvestment in the business and a strong EPS growth trend. Furthermore, Marvell Technology has irregular cash flows.
