Set Sail With Marvell Technology Group Ltd. (MRVL), Tesla, Inc. (TSLA)

The shares of Marvell Technology Group Ltd. have increased by more than 58.69% this year alone. The shares recently went down by -0.18% or -$0.04 and now trades at $22.01. The shares of Tesla, Inc. (NASDAQ:TSLA), has jumped by 52.18% year to date as of 12/25/2017. The shares currently trade at $325.20 and have been able to report a change of -5.31% over the past one week.

The stock of Marvell Technology Group Ltd. and Tesla, Inc. were two of the most active stocks on Monday. Investors seem to be very interested in what happens to the stocks of these two companies but do investors favor one over the other? We will analyze the growth, profitability, risk, valuation, and insider trends of both companies and see which one investors prefer.

Next 5Y EPS Growth: 22.45% versus 35.00%

When a company is able to grow consistently in terms of earnings at a high compound rate have the highest likelihood of creating value for its shareholders over time. Analysts have predicted that MRVL will grow it’s earning at a 22.45% annual rate in the next 5 years. This is in contrast to TSLA which will have a positive growth at a 35.00% annual rate. This means that the higher growth rate of TSLA implies a greater potential for capital appreciation over the years.

Profitability and Returns

Growth alone cannot be used to see if the company will be valuable. Shareholders will be the losers if a company invest in ventures that aren’t profitable enough to support upbeat growth. In order for us to accurately measure profitability and return, we will be using the EBITDA margin and Return on Investment (ROI), which balances the difference in capital structure. MRVL has an EBITDA margin of 21.32%, this implies that the underlying business of MRVL is more profitable. The ROI of MRVL is 0.70% while that of TSLA is -5.80%. These figures suggest that MRVL ventures generate a higher ROI than that of TSLA.

Cash Flow

The value of a stock is ultimately determined by the amount of cash flow that the investors have available. Over the last 12 months, MRVL’s free cash flow per share is a positive 11.02, while that of TSLA is negative -22.18.

Liquidity and Financial Risk

The ability of a company to meet up with its short-term obligations and be able to clear its longer-term debts is measured using Liquidity and leverage ratios. The current ratio for MRVL is 4.90 and that of TSLA is 1.10. This implies that it is easier for MRVL to cover its immediate obligations over the next 12 months than TSLA. The debt ratio of MRVL is 0.00 compared to 2.12 for TSLA. TSLA can be able to settle its long-term debts and thus is a lower financial risk than MRVL.

Valuation

MRVL currently trades at a forward P/E of 16.85, a P/B of 2.68, and a P/S of 4.56 while TSLA trades at a P/B of 11.55, and a P/S of 5.18. This means that looking at the earnings, book values and sales basis, MRVL is the cheaper one. It is very obvious that earnings are the most important factors to investors, thus analysts are most likely to place their bet on the P/E.

Analyst Price Targets and Opinions

The mistake some people make is that they think a cheap stock has more value to it. In order to know the value of a stock, there is need to compare its current price to its likely trading price in the future. The price of MRVL is currently at a -19.38% to its one-year price target of 27.30. Looking at its rival pricing, TSLA is at a 4.01% relative to its price target of 312.65. This figure implies that over the next one year, TSLA is a better investment.

When looking at the investment recommendation on say a scale of 1 to 5 (1 being a strong buy, 3 a hold, and 5 a sell), MRVL is given a 2.20 while 3.00 placed for TSLA. This means that analysts are more bullish on the outlook for TSLA stocks.

Insider Activity and Investor Sentiment

Short interest or otherwise called the percentage of a stock’s tradable shares currently being shorted is another data that investors use to get a handle on sentiment. The short ratio for MRVL is 3.85 while that of TSLA is just 4.99. This means that analysts are more bullish on the forecast for MRVL stock.

Conclusion

The stock of Tesla, Inc. defeats that of Marvell Technology Group Ltd. when the two are compared, with TSLA taking 3 out of the total factors that were been considered. TSLA happens to be more profitable, generates a higher ROI, has higher cash flow per share, higher liquidity and has a lower financial risk. When looking at the stock valuation, TSLA is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for TSLA is better on when it is viewed on short interest.

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