Qorvo Inc (QRVO, Financial) recently experienced a daily gain of 4.84%, yet over the past three months, the stock has seen a decline of 12.17%. With a reported Loss Per Share of 1, investors are keenly asking: is Qorvo fairly valued? The following analysis aims to shed light on this question by delving into Qorvo's valuation in relation to its intrinsic value, as indicated by the GF Value.
Company Introduction
Qorvo Inc (QRVO, Financial) represents a merger of RF Micro Devices and TriQuint Semiconductor, which took place in January 2015. The company is a key player in the production of radio frequency filters, power amplifiers, and front-end modules, essential components in many advanced smartphones. Beyond the smartphone market, Qorvo supplies products for wireless base stations, cable TV, networking equipment, and various applications in infrastructure and the military. With a current stock price of $91.66 and a GF Value of $100.86, Qorvo has a market cap of $8.90 billion. This comparison between the stock price and GF Value sets the stage for a deeper evaluation of Qorvo's fair market value.
Understanding the GF Value
The GF Value is a proprietary metric that represents the intrinsic value of a stock, based on historical trading multiples, an adjustment factor reflecting past performance and growth, and future business performance estimates. If a stock's price is significantly above the GF Value Line, it may be considered overvalued, suggesting a potentially poor future return. Conversely, a price well below the GF Value Line could indicate an undervalued stock and the possibility of higher future returns. According to the GF Value, Qorvo (QRVO, Financial) appears to be fairly valued, with a market cap of $8.90 billion at its current price of $91.66 per share. This assessment suggests that the long-term return of Qorvo's stock could be commensurate with the company's business growth rate.
Financial Strength Assessment
When investing in a company's stock, assessing its financial strength is crucial to mitigate the risk of permanent loss. Qorvo's financial strength is fair, with a cash-to-debt ratio of 0.35, ranking below 82.56% of companies in the Semiconductors industry. The overall financial strength rating for Qorvo is 5 out of 10.
Profitability and Growth Insights
Investing in profitable companies, especially those with a history of consistent profitability, generally carries less risk. Qorvo has been profitable 7 out of the past 10 years, with a 12-month revenue of $3.10 billion and a Loss Per Share of $1. The company's operating margin is -2.46%, ranking lower than 72.33% of its industry peers. The profitability rank for Qorvo is 7 out of 10, indicating fair profitability. Regarding growth, Qorvo's 3-year average annual revenue growth rate is 8.5%, which is below the industry median. The 3-year average EBITDA growth rate is -12.7%, ranking lower than 87.1% of the industry.
ROIC vs. WACC Analysis
Comparing a company's Return on Invested Capital (ROIC) with its Weighted Average Cost of Capital (WACC) offers insights into its profitability relative to the capital invested. Ideally, ROIC should exceed WACC. Qorvo's ROIC over the past 12 months is -1.22, while its WACC stands at 11.65, indicating challenges in generating cash flow relative to its invested capital.
Conclusive Summary
In summary, Qorvo (QRVO, Financial) appears to be fairly valued according to our analysis. The company's financial condition and profitability are deemed fair, although its growth ranks below the majority of its peers in the Semiconductors industry. For a detailed exploration of Qorvo's financials, investors can view the 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
