The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and impressive record of earnings per share growth. However, as a counter to these strengths, we find that the stock itself is trading at a premium valuation.
Highlights from the ratings report include:
- Powered by its strong earnings growth of 142.85% and other important driving factors, this stock has surged by 65.57% over the past year, outperforming the rise in the S&P 500 Index during the same period. Looking ahead, however, we cannot assume that the stock's past performance is going to drive future results. Quite to the contrary, its sharp appreciation over the last year is one of the factors that should prompt investors to seek better opportunities elsewhere.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Semiconductors & Semiconductor Equipment industry and the overall market on the basis of return on equity, CAVIUM NETWORKS INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- CAVM's debt-to-equity ratio is very low at 0.03 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, CAVM has a quick ratio of 2.08, which demonstrates the ability of the company to cover short-term liquidity needs.
- CAVM's very impressive revenue growth greatly exceeded the industry average of 0.3%. Since the same quarter one year prior, revenues leaped by 52.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
Cavium Networks, Inc. engages in the design, development, and marketing of semiconductor processors for intelligent and secure networks. The company has a P/E ratio of 49.6, below the average electronics industry P/E ratio of 50.2 and above the S&P 500 P/E ratio of 17.7. Cavium has a market cap of $2.1 billion and is part of the technology sector and electronics industry. Shares are up 14.5% year to date as of the close of trading on Thursday.You can view the full Cavium Ratings Report or get investment ideas from our investment research center. -- Reported by Kevin Baker in Jupiter, Fla.
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