Cavium Networks, Inc. (NASDAQ:CAVM)

CAPS Rating: 2 out of 5

Provider of highly integrated semiconductor processors that enable intelligent networking, communications and security applications.

Recs

1
Player Avatar TechGooRoo (23.75) Submitted: 11/2/2007 12:43:23 AM : Underperform Start Price: $28.98 CAVM Score: -21.18

Let's review some vital data:- Market cap: $1.15B- Revenue for the trailing 12 months is about $48M.That's right, they're currently trading at 24x revenue. That's simply absurd. If some 800lb. hardware company wanted to buy Cavium, they'd almost certainly wait until it dropped at least to the 10x range, unless it was a very strategic acquisition and there was competition.Even if you assume similar revenue growth for the next quarter, to $16M, that's $54M for all of 2007, and still 21x revenue.3rd quarter was the first quarter where Cavium was profitable. They made $186K of profit from product, the rest was from interest income on the $100M they received when they went public in May. That's $1.3M in interest income.Given the Q3 net income of $1.31M, they'd have to double their net income for the next three quarters to gain a TTM P/E 58.While Cavium looks like a fine company, the stock price is way inflated.

Member Avatar TheParadox (91.92) Submitted: 5/15/2008 4:32:34 PM
Recs: 0

...that is correct. in fact, i just ran a screen for tech companies with PE above 80ish with some other rev, NI and other earnings data and just "shorted" them on CAPS... including this one. anything with a PE over 70 just seems to risky... my real life cut off is about 45 - 55...

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