NEW YORK ( TheStreet) -- Stocks that have posted year-to-date gains of more than 60% aren't often considered undervalued, but Marvell ( MRVL), after having a brutal 2012 and losing more than 50% of its value, hasn't exactly been an easy company to understand.While Marvell has made some questionable decisions, such as pursuing markets in areas like Chinese mobile and wireless, the semiconductor giant also has what I consider to be a very underrated applications segment in markets for solid-state drives (SSD). This is an area where it competes with leaders like Micron ( MU), which has shown tremendous growth. Not to mention, Marvell also has a strong network processing segment where management has been doing better than holding its own against the likes of Cisco ( CSCO). Even with all of these positives, which suggest that Marvell is a well-diversified operation, the company hasn't exactly been flawless in its execution. Making matters more complicated, Marvell is still dealing with the overhang of patent litigation, which has been ongoing since 2009 and brought upon by Carnegie Mellon University. In a recent case ruling, Marvell was denied request for a new trial. In its appeal to reduce the damages, it was asked to pay off $1.17 billion. The courts, meanwhile, concluded that Marvell willfully infringed on Carnegie Mellon's patents, which helped the company produce faster-performing chips. To what extent will this "willful" judgment impact Marvell's future earnings? Consequently, despite the company's better-than-expected second-quarter performance, which saw Marvell not only beat its earnings results but also raise guidance, the stock has trended down. Given that the stock is still up by more than 60% on the year, I don't begrudge anyone taking profits. I think it's premature, though, to assume the worse without looking at what's going on within this entire sector. I'm not downplaying the court's verdict, but I also know that "beat-and-raise" quarters in the semiconductor space are like spotting the solar eclipse.
Plus, even with the ongoing patent litigation, management is still posting strong operational results, which fueled a 23% sequential improvement in cash flow. Not only was this 10% better than consensus estimates, but the company also beat gross margin expectations by 50 basis points. What this means is that management's recent focus on securing higher margin businesses has had a positive effect on the company's profitability. To that end, I don't believe there's another chip company performing as well as Marvell, given the company's 10% sequential revenue growth that beat expectations by 2%. With designs wins in products like Apple's ( AAPL) new MacBook Air, Marvell is certain to continue this outperformance while growing share in multiple businesses. Just wait for the boost the company is certain to get from both Microsoft's ( MSFT) and Sony's ( SNE) new gaming consoles. While Marvell does have some near-term challenges to overcome and more credibility to rebuild, I don't believe management has gotten the credit they deserve for holding things together as well as it has. I won't tell you that Marvell will escape its legal issues unscathed, but until the final judgment is passed, no one can truly know what's going to happen and what effects it will have on the company. What I do know is that Marvell is being led by a much underrated management team. In that regard, I believe that these shares remain undervalued on the basis of long-term free-cash-flow growth. And I would be a buyer here at any price under $12 per share. At the time of publication, the author held shares of Apple. Follow @saintssense This article was written by an independent contributor, separate from TheStreet's regular news coverage.