Competitor Analysis: Evaluating ARM Holdings And Competitors In Semiconductors & Semiconductor Equipment Industry

In today's rapidly evolving and fiercely competitive business landscape, it is crucial for investors and industry analysts to conduct comprehensive company evaluations. In this article, we will undertake an in-depth industry comparison, assessing ARM Holdings ARM alongside its primary competitors in the Semiconductors & Semiconductor Equipment industry. By meticulously examining crucial financial indicators, market positioning, and growth potential, we aim to provide valuable insights to investors and shed light on company's performance within the industry.

ARM Holdings Background

Arm Holdings is the IP owner and developer of the ARM architecture (ARM stands for Acorn RISC Machine), which is used in 99% of the world's smartphone CPU cores, and it also has high market share in other battery-powered devices like wearables, tablets, or sensors. Arm licenses its architecture for a fee, offering different types of licenses depending on the flexibility the customer needs. Customers like Apple or Qualcomm buy architectural licenses, which allows them to modify the architecture and add or delete instructions to tailor the chips to their specific needs. Other clients directly buy off-the-shelf designs from Arm. Both off-the-shelf and architectural customers pay a royalty fee per chip shipped.

Company P/E P/B P/S ROE EBITDA (in billions) Gross Profit (in billions) Revenue Growth
ARM Holdings PLC 403.14 15.20 25.57 -2.45% $-0.12 $0.76 27.94%
NVIDIA Corp 71.70 40.36 30.16 30.42% $10.96 $13.4 205.51%
Taiwan Semiconductor Manufacturing Co Ltd 18.64 4.85 7.52 6.46% $392.33 $296.64 -10.83%
Broadcom Inc 32.76 21.09 12.88 15.3% $5.3 $6.41 4.09%
Advanced Micro Devices Inc 1350.09 4.36 10.90 0.54% $1.13 $2.75 4.22%
Qualcomm Inc 21.37 7.18 4.38 7.05% $2.06 $4.75 -24.26%
Texas Instruments Inc 21.67 9.14 8.46 10.44% $2.34 $2.81 -13.53%
Analog Devices Inc 28.76 2.63 7.75 1.39% $1.18 $1.65 -16.36%
Microchip Technology Inc 18.74 6.63 5.28 9.66% $1.1 $1.53 8.74%
STMicroelectronics NV 9.57 2.60 2.41 7.28% $1.69 $2.11 2.55%
ON Semiconductor Corp 15.25 4.35 4.07 8.05% $0.87 $1.03 -0.54%
GLOBALFOUNDRIES Inc 22.50 2.93 4.16 2.34% $0.64 $0.53 -10.7%
United Microelectronics Corp 8.98 1.79 2.64 4.72% $29.0 $20.46 -24.3%
ASE Technology Holding Co Ltd 16 1.99 0.98 3.06% $28.07 $24.92 -18.27%
First Solar Inc 36.73 2.75 5.50 4.35% $0.37 $0.38 27.37%
Skyworks Solutions Inc 17.02 2.74 3.51 4.09% $0.4 $0.48 -13.37%
Lattice Semiconductor Corp 43.61 14.61 12.49 8.96% $0.07 $0.13 11.4%
Universal Display Corp 41.03 6.06 14.33 3.77% $0.06 $0.11 -12.13%
Rambus Inc 24.89 7.34 15.59 10.86% $0.12 $0.08 -6.19%
MACOM Technology Solutions Holdings Inc 65.69 6.38 9.27 2.63% $0.05 $0.09 -15.59%
Allegro Microsystems Inc 20.77 4.74 4.91 6.18% $0.09 $0.16 15.92%
Average 94.29 7.73 8.36 7.38% $23.89 $19.02 5.69%

Upon closer analysis of ARM Holdings, the following trends become apparent:

  • The current Price to Earnings ratio of 403.14 is 4.28x higher than the industry average, indicating the stock is priced at a premium level according to the market sentiment.

  • With a Price to Book ratio of 15.2, which is 1.97x the industry average, ARM Holdings might be considered overvalued in terms of its book value, as it is trading at a higher multiple compared to its industry peers.

  • The stock's relatively high Price to Sales ratio of 25.57, surpassing the industry average by 3.06x, may indicate an aspect of overvaluation in terms of sales performance.

  • The company has a lower Return on Equity (ROE) of -2.45%, which is 9.83% below the industry average. This indicates potential inefficiency in utilizing equity to generate profits, which could be attributed to various factors.

  • Compared to its industry, the company has lower Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of $-120 Million, which is -0.01x below the industry average, potentially indicating lower profitability or financial challenges.

  • The gross profit of $760 Million is 0.04x below that of its industry, suggesting potential lower revenue after accounting for production costs.

  • The company's revenue growth of 27.94% exceeds the industry average of 5.69%, indicating strong sales performance and market outperformance.

Debt To Equity Ratio

The debt-to-equity (D/E) ratio is an important measure to assess the financial structure and risk profile of a company.

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 ARM Holdings in relation to its top 4 peers based on the Debt-to-Equity ratio, the following insights can be derived:

  • In terms of the debt-to-equity ratio, ARM Holdings has a lower level of debt compared to its top 4 peers, indicating a stronger financial position.

  • This implies that the company relies less on debt financing and has a more favorable balance between debt and equity with a lower debt-to-equity ratio of 0.04.

Key Takeaways

ARM Holdings has a high PE ratio, indicating that its stock price is relatively high compared to its earnings. The high PB ratio suggests that the stock is trading at a premium to its book value. The high PS ratio indicates that the stock is trading at a premium to its sales. The low ROE suggests that the company is not generating a high return on its shareholders' equity. The low EBITDA and gross profit indicate that the company's profitability is relatively low. However, the high revenue growth suggests that the company is experiencing strong sales growth compared to its peers in the Semiconductors & Semiconductor Equipment industry.

This article was generated by Benzinga's automated content engine and reviewed by an editor.

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