Has Marvell Technology Group Ltd. (MRVL) Become the Perfect Stock?

Marvell Technology (MRVL)Every investor would love to stumble upon the perfect stock. But will you ever really find a stock that provides everything you could possibly want?

One thing’s for sure: You’ll never discover truly great investments unless you actively look for them. Let’s discuss the ideal qualities of a perfect stock, then decide if Marvell Technology Group Ltd. (NASDAQ:MRVL) fits the bill.

The quest for perfection
Stocks that look great based on one factor may prove horrible elsewhere, making due diligence a crucial part of your investing research. The best stocks excel in many different areas, including these important factors:

Growth. Expanding businesses show healthy revenue growth. While past growth is no guarantee that revenue will keep rising, it’s certainly a better sign than a stagnant top line.
Margins. Higher sales mean nothing if a company can’t produce profits from them. Strong margins ensure that company can turn revenue into profit.
Balance sheet. At debt-laden companies, banks and bondholders compete with shareholders for management’s attention. Companies with strong balance sheets don’t have to worry about the distraction of debt.
Money-making opportunities. Return on equity helps measure how well a company is finding opportunities to turn its resources into profitable business endeavors.
Valuation. You can’t afford to pay too much for even the best companies. By using normalized figures, you can see how a stock’s simple earnings multiple fits into a longer-term context.
Dividends. For tangible proof of profits, a check to shareholders every three months can’t be beat. Companies with solid dividends and strong commitments to increasing payouts treat shareholders well.

With those factors in mind, let’s take a closer look at Marvell Technology Group Ltd. (NASDAQ:MRVL).

Factor What We Want to See Actual Pass or Fail?
Growth 5-year annual revenue growth > 15% 1.8% Fail
1-year revenue growth > 12% (6.6%) Fail
Margins Gross margin > 35% 53% Pass
Net margin > 15% 9.7% Fail
Balance sheet Debt to equity < 50% 0% Pass
Current ratio > 1.3 4.25 Pass
Opportunities Return on equity > 15% 6.5% Fail
Valuation Normalized P/E < 20 30.91 Fail
Dividends Current yield > 2% 2.2% Pass
5-year dividend growth > 10% NM NM
Total score 4 out of 9

Source: S&P Capital IQ. NM = not meaningful; Marvell paid its first dividend in June 2012. Total score = number of passes.

Since we looked at Marvell Technology last year, the company hasn’t been able to regain any ground from the four-point drop it suffered from 2011 to 2012. The stock has also performed badly, falling 30% over the past year.

One big reason for Marvell Technology Group Ltd. (NASDAQ:MRVL)’s decline has been the general weakness of the PC industry. Marvell was somewhat slow to adapt to the growing mobile market, but unlike some of its larger rivals that remain mired in the dying PC world, Marvell has actually taken steps to make the transition toward more forward-looking businesses, including mobile chips and solid-state drives.

One area where Marvell is aiming is in emerging markets. Its new quad-core processor and integrated communications chip is well-suited for the low-cost smartphones and tablets that dominate the market there.

Marvell Technology Group Ltd. (NASDAQ:MRVL) faces plenty of competition. QUALCOMM, Inc. (NASDAQ:QCOM) won business away from Marvell by taking over its place as primary chip provider for Research In Motion Ltd (NASDAQ:BBRY), and NVIDIA Corporation (NASDAQ:NVDA) is fighting hard to push its Tegra line and other chips into mobile devices worldwide as well. Yet with hundreds of millions of smartphones in the $100 range expected to sell in the next year, Marvell just needs to get a reasonably sized slice of a big pie.

To improve, Marvell Technology Group Ltd. (NASDAQ:MRVL) needs to get past its recent patent setback, in which Carnegie Mellon University successfully sued the company to win a $1.17 billion judgment, and get its revenue moving back in the right direction. Instituting a new dividend last summer was good for shareholders, but to achieve perfection, Marvell Technology Group Ltd. (NASDAQ:MRVL) needs to produce the growth necessarily to keep rewarding investors for the long haul.

Keep searching
No stock is a sure thing, but some stocks are a lot closer to perfect than others. By looking for the perfect stock, you’ll go a long way toward improving your investing prowess and learning how to separate out the best investments from the rest.

The article Has Marvell Technology Become the Perfect Stock? originally appeared on Fool.com and is written by Dan Caplinger.

Fool contributor Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends NVIDIA. The Motley Fool owns shares of Qualcomm.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

The 10 Most Expensive Cities to Live in North America

The 13 Most Expensive Headphones in the World to Represent

The Top 20 Wealthiest Soccer Teams in 2014

4 BuzzWorthy Cannabis Stocks And Some Smoking Derivative Plays

The 10 Healthiest Fast Food Chains in America to Dine At

The 5 Most Expensive Cat Food Brands You Can Spoil Your Kitty With

The 6 Best eCommerce Platforms for Small Businesses

The 10 Worst Mistakes an Entrepreneur Can Make

The 5 Most OP Characters in League of Legends to Carry Games and Crush Foes With

The 5 Best Foods to Eat Before Running that Will Help You Pound the Pavement

10 Glaring Plot Holes in The Walking Dead that a Zombie-Filled Bus Could Drive Through

The 5 Biggest Celebrity Stoners Who Love Their Reefer

The 10 Most Overrated Movies Of All Time by Out-of-Touch Critics

Top 6 Least Expensive Cruise Destinations For 2015 that Will Take You to Paradise

10 States with Lowest Substance Abuse Rates in America

The 14 Most Watched TV Finales Ever

The 10 Best Selling Role Playing Games of All Time for PC

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

How to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

Top 15 Billionaires in 2014

5 Pitfalls To Avoid When Buying a Franchise

Top 20 Medical Schools in the US – 2014 Rankings

4 Business Strategies that Turned Jamie Oliver into the World’s Richest Chef

6 Qualities That Make You A Good Team Player

10 High Paying Seasonal Jobs in America this Holiday Season

The 10 Busiest Shipping Lanes in the World

5 Most Valuable Brands in China

The 10 States with Highest Substance Abuse Rates Crippling Their Populace

The Top 10 Things to Do Before You Die That Will Echo for Eternity

The 10 Best Selling Items on Etsy

Top 10 Things to Do in Tokyo, the Greatest City in the World

10 Mistakes on Social Media that Can Harm You and Will Probably Get You Canned

The 10 Best Cities to Find Jobs in 2014

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!