The worst outcome, after buying shares in the company (assuming no leverage), would be to lose all the money you invested. But on the bright side, if you buy stock in a high-quality company at the right price, you can make over 100%. For example, the Marvell Technology, Inc. (NASDAQ:MRVL) stock price has risen 113% over the past half decade. Most would be very happy about that. It’s also up 25% in about a month.
So let’s evaluate the underlying fundamentals over the past 5 years and see if they have moved in line with shareholder returns.
Check out our latest analysis for Marvell Technology
Marvell Technology isn’t currently profitable, so most analysts look to revenue growth to get an idea of how fast the core business is growing. In general, unprofitable companies are expected to grow revenue every year, and by a good margin. As you can imagine, rapid revenue growth, when sustained, often leads to rapid profit growth.
Over the past half-decade, Marvell Technology boasts revenue growth of 19% per year. Even compared to other revenue-focused companies, that’s a good result. Meanwhile, its share price performance certainly reflects strong growth, with the share price rising 16% annually, compounded, over the period. So it’s likely that buyers took note of the strong revenue growth. We think Marvell Technology is worth exploring – perhaps its best days are ahead.
The graph below shows how earnings and income have changed over time (find out the exact values by clicking on the image).
NasdaqGS: MRVL earnings and revenue growth May 25, 2023.
NasdaqGS: MRVL earnings and revenue growth May 25, 2023.We like insiders buying the stock over the past twelve months. That said, most people consider earnings and revenue growth trends to be a more meaningful guide to business. You can see what analysts are predicting for Marvell Technology here interactive chart of future profit estimates.
What about dividends?
In addition to measuring return on share price, investors should also consider total shareholder return (TSR). While the share price return reflects only the change in share price, TSR includes the value of dividends (assuming they are reinvested) and the benefit of any discounted capital raising or deployment. So, for companies that pay a generous dividend, the TSR is often much higher than the return on the stock price. As it happens, Marvell Technology’s TSR over the last 5 years was 122%, which exceeds the share price return mentioned earlier. Dividends paid by the company thus increased in total shareholder return.
A different perspective
While the broader market has gained about 1.7% in the past year, Marvell Technology shareholders have lost 19% (even including dividends). However, keep in mind that even the best stocks will sometimes underperform the market over a twelve-month period. Long-term investors wouldn’t be so upset, as they would earn 17% every year, for five years. If fundamentals continue to point to long-term sustainable growth, the current selloff could be an opportunity worth considering. If you want to explore this action further, insider buying data is an obvious place to start. You can click here to see who bought the shares – and the price they paid.
Marvell Technology isn’t the only stock insiders are buying. For those who like to find profitable investments this free a list of growing companies with recent insider buys, could be just the ticket.
Note that the market returns reported in this article reflect the market-weighted average returns of stocks currently trading on US exchanges.
Valuation is complex, but we help make it simple.
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This Simply Wall St article 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 into account your goals or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Please note that our analysis may not take into account the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any of the stocks mentioned.