In today's fast-paced and highly competitive business world, it is crucial for investors and industry followers to conduct comprehensive company evaluations. In this article, we will delve into an extensive industry comparison, evaluating Broadcom AVGO in relation to its major competitors in the Semiconductors & Semiconductor Equipment industry. By closely examining key financial metrics, market standing, and growth prospects, our objective is to provide valuable insights and highlight company's performance in the industry.
Broadcom Background
Broadcom is the sixth-largest semiconductor company globally and has expanded into various software businesses, with over $30 billion in annual revenue. It sells 17 core semiconductor product lines across wireless, networking, broadband, storage, and industrial markets. It is primarily a fabless designer but holds some manufacturing in-house, like for its best-of-breed FBAR filters that sell into the Apple iPhone. In software, it sells virtualization, infrastructure, and security software to large enterprises, financial institutions, and governments.Broadcom is the product of consolidation. Its businesses are an amalgamation of former companies like legacy Broadcom and Avago Technologies in chips, as well as Brocade, CA Technologies, and Symantec in software.
| Company | P/E | P/B | P/S | ROE | EBITDA (in billions) | Gross Profit (in billions) | Revenue Growth |
|---|---|---|---|---|---|---|---|
| Broadcom Inc | 37.75 | 24.30 | 14.84 | 15.3% | $5.3 | $6.41 | 4.09% |
| NVIDIA Corp | 95.78 | 53.91 | 40.29 | 30.42% | $10.96 | $13.4 | 205.51% |
| Advanced Micro Devices Inc | 327.96 | 5.02 | 12.45 | 1.2% | $1.22 | $2.91 | 10.16% |
| Intel Corp | 108.78 | 1.74 | 3.38 | 2.57% | $5.57 | $7.05 | 9.71% |
| Qualcomm Inc | 21.78 | 7.39 | 4.73 | 12.4% | $3.58 | $5.62 | 4.99% |
| Texas Instruments Inc | 22.69 | 8.63 | 8.39 | 8.14% | $1.98 | $2.43 | -12.7% |
| ARM Holdings PLC | 1552.27 | 26.37 | 44.91 | 1.78% | $0.18 | $0.79 | 13.81% |
| Analog Devices Inc | 28.74 | 2.62 | 7.74 | 1.39% | $1.18 | $1.65 | -16.36% |
| Microchip Technology Inc | 19.07 | 6.23 | 5.26 | 9.66% | $0.75 | $1.12 | 8.74% |
| STMicroelectronics NV | 10.13 | 2.44 | 2.47 | 6.69% | $1.43 | $1.95 | -3.36% |
| ON Semiconductor Corp | 16.08 | 4.32 | 4.26 | 7.37% | $0.79 | $0.94 | -4.06% |
| GLOBALFOUNDRIES Inc | 29.17 | 2.66 | 4.02 | 2.53% | $0.73 | $0.53 | 0.11% |
| ASE Technology Holding Co Ltd | 21 | 2.18 | 1.13 | 3.06% | $28.07 | $24.92 | -18.27% |
| United Microelectronics Corp | 8.67 | 1.73 | 2.55 | 4.72% | $29.0 | $20.46 | -24.3% |
| First Solar Inc | 35.51 | 2.66 | 5.32 | 4.35% | $0.37 | $0.38 | 27.37% |
| Skyworks Solutions Inc | 18.40 | 2.67 | 3.59 | 3.76% | $0.37 | $0.51 | -9.61% |
| Lattice Semiconductor Corp | 39.59 | 14.56 | 13.89 | 14.98% | $0.05 | $0.12 | -3.05% |
| Universal Display Corp | 42.17 | 6.23 | 14.73 | 3.77% | $0.06 | $0.11 | -12.13% |
| MACOM Technology Solutions Holdings Inc | 82.34 | 6.03 | 9.82 | 2.63% | $0.03 | $0.09 | -15.59% |
| Rambus Inc | 18.64 | 5.81 | 13.49 | 5.87% | $0.06 | $0.1 | 16.08% |
| Allegro Microsystems Inc | 27.32 | 5.30 | 5.64 | 2.99% | $0.06 | $0.13 | 2.49% |
| Average | 126.3 | 8.43 | 10.4 | 6.51% | $4.32 | $4.26 | 8.98% |
Upon analyzing Broadcom, the following trends can be observed:
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A Price to Earnings ratio of 37.75 significantly below the industry average by 0.3x suggests undervaluation. This can make the stock appealing for those seeking growth.
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With a Price to Book ratio of 24.3, which is 2.88x the industry average, Broadcom might be considered overvalued in terms of its book value, as it is trading at a higher multiple compared to its industry peers.
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The Price to Sales ratio of 14.84, which is 1.43x the industry average, suggests the stock could potentially be overvalued in relation to its sales performance compared to its peers.
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The Return on Equity (ROE) of 15.3% is 8.79% above the industry average, highlighting efficient use of equity to generate profits.
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The company has higher Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of $5.3 Billion, which is 1.23x above the industry average, indicating stronger profitability and robust cash flow generation.
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The gross profit of $6.41 Billion is 1.5x above that of its industry, highlighting stronger profitability and higher earnings from its core operations.
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The company's revenue growth of 4.09% is significantly below the industry average of 8.98%. This suggests a potential struggle in generating increased sales volume.
Debt To Equity Ratio
The debt-to-equity (D/E) ratio provides insights into the proportion of debt a company has in relation to its equity and asset value.
Considering the debt-to-equity ratio in industry comparisons allows for a concise evaluation of a company's financial health and risk profile, aiding in informed decision-making.
In terms of the Debt-to-Equity ratio, Broadcom stands in comparison with its top 4 peers, leading to the following comparisons:
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In terms of the debt-to-equity ratio, Broadcom has a relatively higher level of debt of 1.64 compared to its top 4 peers.
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This could be seen as a potential risk factor for the company, as a higher debt burden may increase financial vulnerability.
Key Takeaways
In comparison to its peers in the Semiconductors & Semiconductor Equipment industry, Broadcom has a low PE ratio, indicating potential undervaluation. However, its high PB and PS ratios suggest overvaluation relative to industry standards. On the other hand, Broadcom's high ROE, EBITDA, gross profit, and low revenue growth position it favorably within the industry, showcasing strong profitability and operational efficiency.
This article was generated by Benzinga's automated content engine and reviewed by an editor.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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