Cavium Inc’s (NASDAQ:CAVM): Cavium, Inc. designs, develops, and markets semiconductor processors for intelligent and secure networks in the United States and internationally. The US$5.27B market-cap posted a loss in its most recent financial year of -US$68.86M and a latest trailing-twelve-month loss of -US$60.32M shrinking the gap between loss and breakeven. As path to profitability is the topic on CAVM’s investors mind, I’ve decided to gauge market sentiment. In this article, I will touch on the expectations for CAVM’s growth and when analysts expect the company to become profitable.
Expectation from analysts is CAVM is on the verge of breakeven. They anticipate the company to incur a final loss in 2018, before generating positive profits of US$54.97M in 2019. CAVM is therefore projected to breakeven around a couple of months from now! How fast will CAVM have to grow each year in order to reach the breakeven point by 2019? Working backwards from analyst estimates, it turns out that they expect the company to grow 109.95% year-on-year, on average, which is extremely buoyant. If this rate turns out to be too aggressive, CAVM may become profitable much later than analysts predict.
Underlying developments driving CAVM’s growth isn’t the focus of this broad overview, however, take into account that by and large a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.
Before I wrap up, there’s one issue worth mentioning. CAVM currently has a relatively high level of debt. Typically, debt shouldn’t exceed 40% of your equity, which in CAVM’s case is 82.91%. A higher level of debt requires more stringent capital management which increases the risk around investing in the loss-making company.
There are too many aspects of CAVM to cover in one brief article, but the key fundamentals for the company can all be found in one place – CAVM’s company page on Simply Wall St. I’ve also compiled a list of important factors you should look at:
- Valuation: What is CAVM worth today? Has the future growth potential already been factored into the price? The intrinsic value infographic in our free research report helps visualize whether CAVM is currently mispriced by the market.
- Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Cavium’s board and the CEO’s back ground.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.