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Howard Marks put it nicely when he said that, rather than worrying about share price volatility, 'The possibility of permanent loss is the risk I worry about... and every practical investor I know worries about.' When we think about how risky a company is, we always like to look at its use of debt, since debt overload can lead to ruin. Importantly, Marvell Technology, Inc. (NASDAQ:MRVL) does carry debt. But should shareholders be worried about its use of debt?
When Is Debt A Problem?
Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. However, a more usual (but still expensive) situation is where a company must dilute shareholders at a cheap share price simply to get debt under control. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. When we think about a company's use of debt, we first look at cash and debt together.
View our latest analysis for Marvell Technology
What Is Marvell Technology's Net Debt?
The chart below, which you can click on for greater detail, shows that Marvell Technology had US$4.09b in debt in November 2024; about the same as the year before. However, it also had US$868.1m in cash, and so its net debt is US$3.23b.
A Look At Marvell Technology's Liabilities
We can see from the most recent balance sheet that Marvell Technology had liabilities of US$1.76b falling due within a year, and liabilities of US$4.58b due beyond that. Offsetting these obligations, it had cash of US$868.1m as well as receivables valued at US$997.9m due within 12 months. So its liabilities total US$4.48b more than the combination of its cash and short-term receivables.
Since publicly traded Marvell Technology shares are worth a very impressive total of US$96.8b, it seems unlikely that this level of liabilities would be a major threat. But there are sufficient liabilities that we would certainly recommend shareholders continue to monitor the balance sheet, going forward. When analysing debt levels, the balance sheet is the obvious place to start. But it is future earnings, more than anything, that will determine Marvell Technology's ability to maintain a healthy balance sheet going forward. So if you're focused on the future you can check out this free report showing analyst profit forecasts.
In the last year Marvell Technology had a loss before interest and tax, and actually shrunk its revenue by 2.2%, to US$5.4b. That's not what we would hope to see.