In the ever-changing and fiercely competitive business landscape, conducting thorough company analysis is crucial for investors and industry experts. In this article, we will undertake a comprehensive industry comparison, evaluating Broadcom AVGO and its primary competitors in the Semiconductors & Semiconductor Equipment industry. By closely examining key financial metrics, market position, and growth prospects, our aim is to provide valuable insights for investors and shed light on company's performance within 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 iPhone. It counts Apple as a large customer at roughly one fifth of sales. In software, it sells infrastructure and security software to large 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 | 27.17 | 16.51 | 10.41 | 14.98% | $4.91 | $6.16 | 4.87% |
| NVIDIA Corp | 109.85 | 40.85 | 34.67 | 23.79% | $7.41 | $9.46 | 101.48% |
| Taiwan Semiconductor Manufacturing Co Ltd | 15.98 | 4.72 | 6.76 | 5.8% | $341.62 | $260.2 | -9.98% |
| Texas Instruments Inc | 18.34 | 8.70 | 7.45 | 10.99% | $2.39 | $2.91 | -13.07% |
| Qualcomm Inc | 14.22 | 5.87 | 3.17 | 8.93% | $2.41 | $4.66 | -22.72% |
| Analog Devices Inc | 23.27 | 2.37 | 6.79 | 2.44% | $1.53 | $1.96 | -1.07% |
| ARM Holdings PLC | 129.15 | 12.36 | 19.60 | 2.54% | $0.15 | $0.64 | -2.46% |
| Microchip Technology Inc | 17.89 | 6.17 | 4.90 | 9.99% | $1.12 | $1.56 | 16.55% |
| STMicroelectronics NV | 9.22 | 2.67 | 2.34 | 7.07% | $1.57 | $2.12 | 12.74% |
| ON Semiconductor Corp | 20.40 | 5.51 | 4.79 | 8.59% | $0.85 | $0.99 | 0.45% |
| GLOBALFOUNDRIES Inc | 20.62 | 2.92 | 3.93 | 2.31% | $0.63 | $0.53 | -7.43% |
| United Microelectronics Corp | 7.10 | 1.74 | 2.24 | 4.59% | $28.73 | $20.25 | -21.87% |
| ASE Technology Holding Co Ltd | 11.85 | 1.90 | 0.84 | 2.82% | $25.7 | $21.74 | -15.06% |
| First Solar Inc | 101.32 | 2.62 | 5.28 | 2.86% | $0.26 | $0.31 | 30.55% |
| Skyworks Solutions Inc | 14.58 | 2.57 | 3.06 | 3.37% | $0.39 | $0.46 | -13.09% |
| Lattice Semiconductor Corp | 51.42 | 18 | 14.57 | 9.29% | $0.06 | $0.13 | 17.79% |
| Universal Display Corp | 36.88 | 5.67 | 12.57 | 3.75% | $0.07 | $0.11 | 7.33% |
| Rambus Inc | 33.69 | 6.61 | 13.47 | 19.78% | $0.03 | $0.1 | -1.07% |
| Allegro Microsystems Inc | 24.02 | 5.53 | 5.55 | 6.11% | $0.08 | $0.16 | 27.8% |
| MACOM Technology Solutions Holdings Inc | 18.53 | 6.18 | 8.41 | 1.31% | $0.03 | $0.09 | -13.78% |
| Average | 35.7 | 7.52 | 8.44 | 7.18% | $21.84 | $17.28 | 4.9% |
Upon a comprehensive analysis of Broadcom, the following trends can be discerned:
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A Price to Earnings ratio of 27.17 significantly below the industry average by 0.76x suggests undervaluation. This can make the stock appealing for those seeking growth.
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The elevated Price to Book ratio of 16.51 relative to the industry average by 2.2x suggests company might be overvalued based on its book value.
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With a relatively high Price to Sales ratio of 10.41, which is 1.23x the industry average, the stock might be considered overvalued based on sales performance.
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The company has a higher Return on Equity (ROE) of 14.98%, which is 7.8% above the industry average. This suggests efficient use of equity to generate profits and demonstrates profitability and growth potential.
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With lower Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of $4.91 Billion, which is 0.22x below the industry average, the company may face lower profitability or financial challenges.
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Compared to its industry, the company has lower gross profit of $6.16 Billion, which indicates 0.36x below the industry average, potentially indicating lower revenue after accounting for production costs.
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With a revenue growth of 4.87%, which is much lower than the industry average of 4.9%, the company is experiencing a notable slowdown in sales expansion.
Debt To Equity Ratio
The debt-to-equity (D/E) ratio indicates the proportion of debt and equity used by a company to finance its assets and operations.
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.
By analyzing Broadcom in relation to its top 4 peers based on the Debt-to-Equity ratio, the following insights can be derived:
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In terms of the debt-to-equity ratio, Broadcom has a relatively higher level of debt of 1.78 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
Broadcom's low PE ratio suggests that it is undervalued compared to its peers in the Semiconductors & Semiconductor Equipment industry. The high PB and PS ratios indicate that the company's stock price may be overvalued relative to its book value and sales. On the other hand, Broadcom's high ROE suggests that it is generating strong returns on shareholder equity. The low EBITDA, gross profit, and revenue growth indicate potential challenges in the company's financial performance. Overall, Broadcom's valuation analysis suggests a mixed outlook for the company compared to its industry peers.
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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