In today's rapidly changing and highly competitive business world, it is imperative for investors and industry observers to carefully assess companies before making investment choices. In this article, we will undertake a comprehensive industry comparison, evaluating Broadcom AVGO vis-à-vis its key competitors in the Semiconductors & Semiconductor Equipment industry. Through a detailed analysis of important financial indicators, market standing, and growth potential, our goal 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 | 32.60 | 20.98 | 12.82 | 15.3% | $5.3 | $6.41 | 4.09% |
| NVIDIA Corp | 68.94 | 38.80 | 28.99 | 30.42% | $10.96 | $13.4 | 205.51% |
| Taiwan Semiconductor Manufacturing Co Ltd | 18.82 | 4.90 | 7.59 | 6.46% | $392.33 | $296.64 | -10.83% |
| Advanced Micro Devices Inc | 1328.91 | 4.30 | 10.73 | 0.54% | $1.13 | $2.75 | 4.22% |
| Qualcomm Inc | 21.32 | 7.17 | 4.37 | 7.05% | $2.06 | $4.75 | -24.26% |
| Texas Instruments Inc | 21.83 | 9.20 | 8.53 | 10.44% | $2.34 | $2.81 | -13.53% |
| Analog Devices Inc | 28.85 | 2.64 | 7.77 | 1.39% | $1.18 | $1.65 | -16.36% |
| ARM Holdings PLC | 414.88 | 15.65 | 26.31 | -2.45% | $-0.12 | $0.76 | 27.94% |
| Microchip Technology Inc | 18.78 | 6.65 | 5.29 | 9.66% | $1.1 | $1.53 | 8.74% |
| STMicroelectronics NV | 9.80 | 2.66 | 2.46 | 7.28% | $1.69 | $2.11 | 2.55% |
| ON Semiconductor Corp | 15.71 | 4.48 | 4.19 | 8.05% | $0.87 | $1.03 | -0.54% |
| GLOBALFOUNDRIES Inc | 22.91 | 2.98 | 4.23 | 2.34% | $0.64 | $0.53 | -10.7% |
| United Microelectronics Corp | 9.15 | 1.82 | 2.69 | 4.72% | $29.0 | $20.46 | -24.3% |
| ASE Technology Holding Co Ltd | 15.98 | 1.98 | 0.98 | 3.06% | $28.07 | $24.92 | -18.27% |
| First Solar Inc | 37.59 | 2.82 | 5.63 | 4.35% | $0.37 | $0.38 | 27.37% |
| Skyworks Solutions Inc | 17.30 | 2.79 | 3.56 | 4.09% | $0.4 | $0.48 | -13.37% |
| Lattice Semiconductor Corp | 43.62 | 14.61 | 12.49 | 8.96% | $0.07 | $0.13 | 11.4% |
| Universal Display Corp | 41.63 | 6.15 | 14.54 | 3.77% | $0.06 | $0.11 | -12.13% |
| Rambus Inc | 25.42 | 7.49 | 15.92 | 10.86% | $0.12 | $0.08 | -6.19% |
| MACOM Technology Solutions Holdings Inc | 66.17 | 6.43 | 9.34 | 2.63% | $0.05 | $0.09 | -15.59% |
| Allegro Microsystems Inc | 20.98 | 4.79 | 4.96 | 6.18% | $0.09 | $0.16 | 15.92% |
| Average | 112.43 | 7.42 | 9.03 | 6.49% | $23.62 | $18.74 | 6.88% |
When analyzing Broadcom, the following trends become evident:
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The stock's Price to Earnings ratio of 32.6 is lower than the industry average by 0.29x, suggesting potential value in the eyes of market participants.
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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 20.98 which exceeds the industry average by 2.83x.
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With a relatively high Price to Sales ratio of 12.82, which is 1.42x 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 15.3%, which is 8.81% above the industry average. This suggests efficient use of equity to generate profits and demonstrates profitability and growth potential.
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Compared to its industry, the company has lower Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of $5.3 Billion, which is 0.22x below the industry average, potentially indicating lower profitability or financial challenges.
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Compared to its industry, the company has lower gross profit of $6.41 Billion, which indicates 0.34x below the industry average, potentially indicating lower revenue after accounting for production costs.
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The company's revenue growth of 4.09% is significantly below the industry average of 6.88%. This suggests a potential struggle in generating increased sales volume.
Debt To Equity Ratio
The debt-to-equity (D/E) ratio assesses the extent to which a company relies on borrowed funds compared to its equity.
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 comparing Broadcom with its top 4 peers based on the Debt-to-Equity ratio, the following insights can be observed:
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Compared to its top 4 peers, Broadcom has a higher debt-to-equity ratio of 1.64, indicating a higher level of debt financing.
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This higher debt proportion can expose the company to increased financial risk and potential challenges.
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.
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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