Marvell Technology Group Ltd. (NASDAQ:MRVL), a large-cap worth US$14b, comes to mind for investors seeking a strong and reliable stock investment. Most investors favour these big stocks due to their strong balance sheet and high market liquidity, meaning there are an abundance of stock in the public market available for trading. These companies are resilient in times of low liquidity and are not as strongly impacted by interest rate hikes as companies with lots of debt. Today I will analyse the latest financial data for MRVL to determine is solvency and liquidity and whether the stock is a sound investment.
Does MRVL Produce Much Cash Relative To Its Debt?
MRVL has increased its debt level by about US$1.7b over the last 12 months accounting for long term debt. With this increase in debt, MRVL currently has US$582m remaining in cash and short-term investments to keep the business going. On top of this, MRVL has generated US$597m in operating cash flow in the last twelve months, leading to an operating cash to total debt ratio of 34%, indicating that MRVL’s debt is appropriately covered by operating cash.
Can MRVL meet its short-term obligations with the cash in hand?
At the current liabilities level of US$637m, it seems that the business has been able to meet these commitments with a current assets level of US$1.4b, leading to a 2.19x current account ratio. The current ratio is the number you get when you divide current assets by current liabilities. Usually, for Semiconductor companies, this is a suitable ratio as there’s enough of a cash buffer without holding too much capital in low return investments.
Does MRVL face the risk of succumbing to its debt-load?
With debt at 24% of equity, MRVL may be thought of as appropriately levered. MRVL is not taking on too much debt commitment, which can be restrictive and risky for equity-holders. Risk around debt is very low for MRVL, and the company also has the ability and headroom to increase debt if needed going forward.
MRVL’s high cash coverage and appropriate debt levels indicate its ability to utilise its borrowings efficiently in order to generate ample cash flow. Furthermore, the company exhibits an ability to meet its near-term obligations, which isn’t a big surprise for a large-cap. Keep in mind I haven’t considered other factors such as how MRVL has been performing in the past. I recommend you continue to research Marvell Technology Group to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for MRVL’s future growth? Take a look at our free research report of analyst consensus for MRVL’s outlook.
- Valuation: What is MRVL worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether MRVL is currently mispriced by the market.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
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