MaxLinear Inc (MXL, Financial) has recently experienced a significant drop in its stock price, recording a daily loss of 21.96%. Over the past three months, the company's stock value has decreased by 51.37%, and it currently reports a Loss Per Share of 0.04. This article seeks to answer the question: is MaxLinear's stock significantly undervalued? We will explore this question through a detailed valuation analysis, focusing on the company's intrinsic value and financial health. We invite you to read on for an in-depth understanding of MaxLinear's current market position.
A Snapshot of MaxLinear Inc (MXL, Financial)
MaxLinear is a leading provider of radio frequency and mixed-signal integrated circuits for a wide range of applications, including cable and satellite broadband communications, the connected home, and various data center, metro, and long-haul fiber networks. Its radio frequency receiver products capture and process digital and analog broadband signals, enabling the distribution and display of broadband video and data content in various electronic devices. The company's client base comprises original equipment manufacturers, module makers, and original design manufacturers.
Despite the recent drop in its stock price to $14.36, MaxLinear's market cap is $1.20 billion. The company's current price is significantly lower than its GF Value of $49.44, indicating that the stock may be undervalued. The following is a breakdown of MaxLinear's income:
Understanding the GF Value
The GF Value is a unique measure of a stock's intrinsic value, calculated based on historical trading multiples, a GuruFocus adjustment factor based on the company's past performance and growth, and future business performance estimates. The GF Value Line provides an estimate of the fair trading value of the stock. If the stock price is significantly above the GF Value Line, it is overvalued, and its future return is likely to be poor. Conversely, if it is significantly below the GF Value Line, its future return will likely be higher.
Based on this method, MaxLinear's stock appears to be significantly undervalued. Given the current market conditions, the long-term return of MaxLinear's stock is likely to be much higher than its business growth. The GF Value chart of MaxLinear is shown below:
MaxLinear's Financial Strength
Investing in companies with low financial strength could result in permanent capital loss. Therefore, it's crucial to review a company's financial strength before deciding to buy shares. MaxLinear has a cash-to-debt ratio of 1.34, ranking lower than 55.92% of 903 companies in the Semiconductors industry. Despite this, GuruFocus ranks MaxLinear's financial strength as 8 out of 10, indicating a strong balance sheet. The company's debt and cash trend over the past years is shown below:
Profitability and Growth
Investing in profitable companies tends to carry less risk, especially if the companies have demonstrated consistent profitability over the long term. MaxLinear has been profitable for 3 years over the past 10 years. During the past 12 months, the company reported revenues of $858.50 million and a Loss Per Share of $0.04. Its operating margin of 7.02% is better than 67.79% of 953 companies in the Semiconductors industry. Overall, GuruFocus ranks MaxLinear's profitability as fair.
One of the most important factors in the valuation of a company is its growth. Companies that grow faster create more value for shareholders, especially if that growth is profitable. The average annual revenue growth of MaxLinear is 45.8%, which ranks better than 93.48% of 874 companies in the Semiconductors industry. The company's 3-year average EBITDA growth is 72.8%, ranking better than 89.92% of 774 companies in the Semiconductors industry.
ROIC vs. WACC
Comparing a company's return on invested capital (ROIC) to its weighted average cost of capital (WACC) is another way to evaluate its profitability. If the ROIC is higher than the WACC, the company is creating value for shareholders. Over the past 12 months, MaxLinear's ROIC was -1.48, while its WACC came in at 13.64. The historical ROIC vs WACC comparison of MaxLinear is shown below:
Conclusion
In conclusion, MaxLinear's stock appears to be significantly undervalued. The company's financial condition is strong, and its profitability is fair. Its growth ranks better than 89.92% of 774 companies in the Semiconductors industry. To learn more about MaxLinear stock, you can check out its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
