The firm upgraded the company, which designs, develops and markets semiconductor processors for intelligent and secure networks, based on its financial results for the 2014 first quarter.
Cavium reported net income for the quarter was $2.3 million, or 4 cents per diluted share, compared to the net loss for the same quarter 2013, which was -$3.2 million, or -6 cents per diluted share.
Revenue for the 2014 first quarter was $83.2 million versus the $69.5 million from previous year's first quarter.
TheStreet Ratings team rates CAVIUM INC as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:
"We rate CAVIUM INC (CAVM) a HOLD. The primary factors that have impacted our rating are mixed some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. 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 solid stock price performance. However, as a counter to these strengths, we find that the company's return on equity has been disappointing."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 3.4%. Since the same quarter one year prior, revenues rose by 22.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
- CAVM's debt-to-equity ratio is very low at 0.15 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 2.36, which demonstrates the ability of the company to cover short-term liquidity needs.
- The gross profit margin for CAVIUM INC is currently very high, coming in at 82.07%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, CAVM's net profit margin of 0.23% significantly trails the industry average.
- 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, CAVIUM INC's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full analysis from the report here: CAVM Ratings Report