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 | 101.42 | 18.78 | 23.52 | 7.12% | $8.02 | $10.2 | 20.16% |
| NVIDIA Corp | 52.54 | 47.38 | 27.13 | 23.01% | $22.58 | $26.67 | 69.18% |
| Taiwan Semiconductor Manufacturing Co Ltd | 27.03 | 7.67 | 11.14 | 8.19% | $608.71 | $493.4 | 41.61% |
| Advanced Micro Devices Inc | 101.03 | 3.88 | 8.15 | 1.23% | $1.59 | $3.74 | 35.9% |
| Texas Instruments Inc | 40.98 | 11.98 | 12.39 | 7.08% | $1.85 | $2.31 | 11.14% |
| Qualcomm Inc | 16.26 | 6.31 | 4.24 | 10.3% | $3.67 | $6.04 | 16.93% |
| ARM Holdings PLC | 197.36 | 22.93 | 39.27 | 3.17% | $0.46 | $1.21 | 33.73% |
| Micron Technology Inc | 22.03 | 2.70 | 4.09 | 3.79% | $4.33 | $3.51 | 36.56% |
| Analog Devices Inc | 65.96 | 3.44 | 12.33 | 1.63% | $1.2 | $1.61 | 22.28% |
| Monolithic Power Systems Inc | 20.04 | 11.01 | 15.30 | 4.17% | $0.18 | $0.35 | 39.24% |
| STMicroelectronics NV | 27.09 | 1.61 | 2.43 | 0.32% | $0.51 | $0.84 | -27.36% |
| ON Semiconductor Corp | 40.12 | 3.01 | 3.72 | -5.78% | $-0.37 | $0.29 | -22.39% |
| ASE Technology Holding Co Ltd | 19.91 | 2.10 | 1.09 | 2.39% | $27.16 | $24.89 | 11.56% |
| United Microelectronics Corp | 12.01 | 1.44 | 2.35 | 2.06% | $23.86 | $15.45 | 5.91% |
| First Solar Inc | 14.10 | 2.17 | 4.19 | 2.59% | $0.35 | $0.34 | 6.35% |
| Credo Technology Group Holding Ltd | 336.52 | 24.58 | 40.48 | 5.63% | $0.04 | $0.11 | 179.73% |
| Skyworks Solutions Inc | 30.32 | 1.96 | 3.16 | 1.11% | $0.22 | $0.39 | -8.87% |
| Qorvo Inc | 154.97 | 2.46 | 2.31 | 0.93% | $0.11 | $0.37 | -7.6% |
| Lattice Semiconductor Corp | 145.38 | 10.45 | 15.21 | 0.71% | $0.02 | $0.08 | -14.68% |
| Universal Display Corp | 32.68 | 4.50 | 11.55 | 3.93% | $0.08 | $0.13 | 0.62% |
| Average | 71.39 | 9.03 | 11.61 | 4.02% | $36.66 | $30.62 | 22.62% |
After a detailed analysis of Broadcom, the following trends become apparent:
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Notably, the current Price to Earnings ratio for this stock, 101.42, is 1.42x above the industry norm, reflecting a higher valuation relative to the industry.
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It could be trading at a premium in relation to its book value, as indicated by its Price to Book ratio of 18.78 which exceeds the industry average by 2.08x.
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The Price to Sales ratio of 23.52, which is 2.03x the industry average, suggests the stock could potentially be overvalued in relation to its sales performance compared to its peers.
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With a Return on Equity (ROE) of 7.12% that is 3.1% above the industry average, it appears that the company exhibits efficient use of equity to generate profits.
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With lower Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of $8.02 Billion, which is 0.22x below the industry average, the company may face lower profitability or financial challenges.
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The gross profit of $10.2 Billion is 0.33x below that of its industry, suggesting potential lower revenue after accounting for production costs.
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The company is witnessing a substantial decline in revenue growth, with a rate of 20.16% compared to the industry average of 22.62%, which indicates a challenging sales environment.
Debt To Equity Ratio
The debt-to-equity (D/E) ratio is a financial metric that helps determine the level of financial risk associated with a company's capital structure.
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.
When assessing Broadcom against its top 4 peers using the Debt-to-Equity ratio, the following comparisons can be made:
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Among its top 4 peers, Broadcom has a higher debt-to-equity ratio of 0.97.
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This suggests a greater reliance on debt financing, which can expose the company to increased financial risk and potential volatility.
Key Takeaways
The high PE, PB, and PS ratios of Broadcom indicate that the company is relatively overvalued compared to its peers in the Semiconductors & Semiconductor Equipment industry. On the other hand, Broadcom's high ROE suggests strong profitability performance, while its low EBITDA, gross profit, and revenue growth indicate potential areas of concern that may impact its competitive position within the industry.
This article was generated by Benzinga's automated content engine and reviewed by an editor.
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