Canaccord analysts believe that Cavium "will continue to drive strong design in growth and is sufficient to sustain recent strong 20%+ sales growth rates in the wireless infrastructure security and data center markets."
Cavium's annual revenue and EPS of 2014, $373 million and $1.46, respectively, exceeded the firm's estimates of $372.5 million and $1.44, respectively, amidst a choppy macro environment, particularly in 4G infrastructure.
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Strong data center sales were driven by LiquidIO server adapters and security chips, wireless sales were mixed and broadband sales were roughly flat, but should grow faster than the corporate growth rate in 2015, analysts noted.
After strong results and guidance, Canaccord increased their 2015/2016 EPS to $1.87/$2.70 from $1.84/$2.60.
Cavium designs, develops and markets semiconductor processors for intelligent and secure networks. The company is a provider of integrated semiconductor processors, which enable processing for networking, communications, storage, wireless, security, video and connected home and office applications.
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 10.6%. Since the same quarter one year prior, revenues rose by 23.6%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- CAVM's debt-to-equity ratio is very low at 0.16 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 2.31, which demonstrates the ability of the company to cover short-term liquidity needs.
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500, but is less than that of the Semiconductors & Semiconductor Equipment industry average. The net income increased by 25.3% when compared to the same quarter one year prior, rising from $4.34 million to $5.43 million.
- The gross profit margin for CAVIUM INC is currently very high, coming in at 72.25%. Regardless of CAVM's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, CAVM's net profit margin of 5.55% is significantly lower than 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
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