Marvell Technology (MRVL, Financial) is slowly seeing improvements in its business. The company has been focusing on the right areas to power up its growth, and it has been posting strong results that justify its strategic moves.
Products are in demand
Marvell registered slightly better than expected second quarter performance for wireless connectivity, recording double-digit growth both on a quarter-over-quarter and year-over-year basis. Marvell recorded solid growth in the gaming market comprising both console and portable devices for its 1x1 MIMO solutions coupled with robust growth in its 4G smartphone platform. Marvell experienced excellent customer adoption for its combo solutions in tablets, set top boxes, and chrome books for its 2x2 solutions.
Further, there’s robust incoming demand for the high-end 4x4 devices.
For the Internet of Things (IoT) market, Marvell continues to see solid design attraction in the lighting appliances and home automation markets. It’s also believed to be supporting Apple's new HomeKit accessory protocol. HomeKit enabled products are forecasted to be launched in the later half of this year.
In audio business, sales expanded more than 50% primarily due to Google Chromecast shipments which have currently been initiated in 18 countries. Also, there’s continued gaining traction in new service providers with its ARMADA 1500 family of set top box SoCs.
What analysts think
Analyst sentiment is also good. For example, TheStreet Ratings team rates Marvell Technology Group Ltd. as a "Buy" with a ratings score of B owing to several strengths which are believed to outweigh any of the company’s weaknesses. The company's strengths are viewed in several areas like its solid revenue growth, robust financial position with reasonably low debt levels, remarkable earnings per share growth, high growth in net income and extremely sensible valuation levels. At present, there are no major weaknesses which might pull the company down from being a positive outlook.
Valuation and conclusion
The trailing P/E and forward P/E ratios of 19.18 and 11.37 point toward the strength of the company’s operations. The PEG ratio of 1.33, above 1 indicates slower growth. The profit margin of 9.97% is good and suggests healthy company profits. However, the revenue per share and diluted EPS of 7.30 and 0.71 are concerning, and depict a decline in shareholder earnings. But, the quarterly revenue growth and quarterly earnings growth of 30.40% and 87% is impressive and indicates solid investor earnings growth. The current ratio of 3.91 is healthy and defines the robustness of the company’s balance sheet. Finally, the investors are advised to invest into Marvell looking at the solid long-term growth prospects as indicated by the CAGR for the next five years per annum of 8.90%, comparable to the industry’s average of 15.22% and expect promising returns in a long run.
