Does Marvell Technology (NASDAQ:MRVL) Have A Healthy Balance Sheet?

Some say volatility, rather than debt, is the best way to think about risk as an investor, but Warren Buffett famously said that 'Volatility is far from synonymous with risk.' So it might be obvious that you need to consider debt, when you think about how risky any given stock is, because too much debt can sink a company. As with many other companies Marvell Technology, Inc. (NASDAQ:MRVL) makes use of debt. But is this debt a concern to shareholders?

What Risk Does Debt Bring?

Generally speaking, debt only becomes a real problem when a company can't easily pay it off, either by raising capital or with its own cash flow. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. However, a more common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. By replacing dilution, though, debt can be an extremely good tool for businesses that need capital to invest in growth at high rates of return. When we think about a company's use of debt, we first look at cash and debt together.

See our latest analysis for Marvell Technology

What Is Marvell Technology's Debt?

As you can see below, Marvell Technology had US$4.09b of debt, at November 2024, which is about the same as the year before. You can click the chart for greater detail. On the flip side, it has US$868.1m in cash leading to net debt of about US$3.23b.

How Strong Is Marvell Technology's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Marvell Technology had liabilities of US$1.76b due within 12 months and liabilities of US$4.58b due beyond that. Offsetting these obligations, it had cash of US$868.1m as well as receivables valued at US$997.9m due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by US$4.48b.

Given Marvell Technology has a humongous market capitalization of US$97.7b, it's hard to believe these liabilities pose much threat. However, we do think it is worth keeping an eye on its balance sheet strength, as it may change over time. When analysing debt levels, the balance sheet is the obvious place to start. But it is future earnings, more than anything, that will determine Marvell Technology's ability to maintain a healthy balance sheet going forward. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

Over 12 months, Marvell Technology made a loss at the EBIT level, and saw its revenue drop to US$5.4b, which is a fall of 2.2%. We would much prefer see growth.

Caveat Emptor

Importantly, Marvell Technology had an earnings before interest and tax (EBIT) loss over the last year. To be specific the EBIT loss came in at US$240m. When we look at that and recall the liabilities on its balance sheet, relative to cash, it seems unwise to us for the company to have any debt. Quite frankly we think the balance sheet is far from match-fit, although it could be improved with time. For example, we would not want to see a repeat of last year's loss of US$1.5b. So to be blunt we do think it is risky. When analysing debt levels, the balance sheet is the obvious place to start. However, not all investment risk resides within the balance sheet - far from it. Case in point: We've spotted 2 warning signs for Marvell Technology you should be aware of.

Of course, if you're the type of investor who prefers buying stocks without the burden of debt, then don't hesitate to discover our exclusive list of net cash growth stocks, today.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.