Marvell Technology Group Ltd. (NASDAQ:MRVL) shares are up more than 0.75% this year and recently decreased -1.10% or -$0.24 to settle at $21.63. Kohl’s Corporation (NYSE:KSS), on the other hand, is up 17.50% year to date as of 05/17/2018. It currently trades at $63.72 and has returned 5.27% during the past week.
Marvell Technology Group Ltd. (NASDAQ:MRVL) and Kohl’s Corporation (NYSE:KSS) are the two most active stocks in the Semiconductor – Integrated Circuits industry based on today’s trading volumes. Investors are clearly interested in the two names, but is one a better choice than the other? We will compare the two companies across growth, profitability, risk, valuation, and insider trends to answer this question.Growth
The ability to grow earnings at a compound rate over time is a crucial determinant of investment value. Analysts expect MRVL to grow earnings at a 19.83% annual rate over the next 5 years. Comparatively, KSS is expected to grow at a 8.80% annual rate. All else equal, MRVL’s higher growth rate would imply a greater potential for capital appreciation.Profitability and Returns
Growth isn’t very attractive to investors if companies are sacrificing profitability and shareholder returns to achieve that growth. We will use EBITDA margin and Return on Investment (ROI), which control for differences in capital structure between the two companies, to measure profitability and return., compared to an EBITDA margin of 12.61% for Kohl’s Corporation (KSS). MRVL’s ROI is 10.10% while KSS has a ROI of 10.30%. The interpretation is that KSS’s business generates a higher return on investment than MRVL’s.Cash Flow
The amount of free cash flow available to investors is ultimately what determines the value of a stock. MRVL’s free cash flow (“FCF”) per share for the trailing twelve months was +0.16. Comparatively, KSS’s free cash flow per share was +3.63. On a percent-of-sales basis, MRVL’s free cash flow was 3.3% while KSS converted 3.19% of its revenues into cash flow. This means that, for a given level of sales, MRVL is able to generate more free cash flow for investors.Liquidity and Financial Risk
Liquidity and leverage ratios are important because they reveal the financial health of a company. MRVL has a current ratio of 5.60 compared to 2.00 for KSS. This means that MRVL can more easily cover its most immediate liabilities over the next twelve months. MRVL’s debt-to-equity ratio is 0.00 versus a D/E of 0.83 for KSS. KSS is therefore the more solvent of the two companies, and has lower financial risk.Valuation
MRVL trades at a forward P/E of 14.95, a P/B of 2.58, and a P/S of 4.51, compared to a forward P/E of 11.50, a P/B of 1.93, and a P/S of 0.57 for KSS. MRVL is the expensive of the two stocks on an earnings, book value and sales basis. Given that earnings are what matter most to investors, analysts tend to place a greater weight on the P/E.
Analyst Price Targets and Opinions
A cheap stock is not necessarily a value stock. Most of the time, a stock is cheap for good reason. A stock only has value if the current price is substantially below the price at which it should trade in the future. MRVL is currently priced at a -22.92% to its one-year price target of 28.06. Comparatively, KSS is -8.66% relative to its price target of 69.76. This suggests that MRVL is the better investment over the next year.
Risk and Volatility
Beta is a metric that investors frequently use to analyze a stock’s systematic risk. A beta above 1 implies above average market volatility. Conversely, a stock with a beta below 1 is seen as less risky than the overall market. MRVL has a beta of 0.98 and KSS’s beta is 1.25. MRVL’s shares are therefore the less volatile of the two stocks.Insider Activity and Investor Sentiment
Comparing the number of shares sold short to the float is a method analysts often use to get a reading on investor sentiment. MRVL has a short ratio of 6.27 compared to a short interest of 7.64 for KSS. This implies that the market is currently less bearish on the outlook for MRVL.Summary
Marvell Technology Group Ltd. (NASDAQ:MRVL) beats Kohl’s Corporation (NYSE:KSS) on a total of 9 of the 14 factors compared between the two stocks. MRVL is growing fastly, is more profitable, has a higher cash conversion rate, higher liquidity and has lower financial risk. MRVL is more undervalued relative to its price target. Finally, MRVL has better sentiment signals based on short interest.