In the dynamic and fiercely competitive business environment, conducting a thorough analysis of companies is crucial for investors and industry enthusiasts. In this article, we will perform an extensive industry comparison, evaluating Broadcom AVGO in relation to its major competitors in the Semiconductors & Semiconductor Equipment industry. By closely examining crucial financial metrics, market position, and growth prospects, we aim to offer 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 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 | 42.52 | 27.09 | 16.72 | 15.3% | $5.3 | $6.41 | 4.09% |
| NVIDIA Corp | 71.45 | 49.58 | 34.89 | 32.23% | $14.56 | $16.79 | 265.28% |
| Advanced Micro Devices Inc | 387.43 | 5.94 | 14.71 | 1.2% | $1.22 | $2.91 | 10.16% |
| Intel Corp | 114.03 | 1.83 | 3.54 | 2.57% | $5.57 | $7.05 | 9.71% |
| Qualcomm Inc | 23.77 | 8.07 | 5.17 | 12.4% | $3.58 | $5.62 | 4.99% |
| Texas Instruments Inc | 24.39 | 9.28 | 9.02 | 8.14% | $1.98 | $2.43 | -12.7% |
| ARM Holdings PLC | 1669.59 | 28.36 | 48.30 | 1.78% | $0.18 | $0.79 | 13.81% |
| Analog Devices Inc | 34.77 | 2.72 | 8.46 | 1.3% | $1.12 | $1.47 | -22.68% |
| Microchip Technology Inc | 20.31 | 6.63 | 5.60 | 5.97% | $0.75 | $1.12 | -18.6% |
| STMicroelectronics NV | 10.44 | 2.51 | 2.54 | 6.69% | $1.5 | $1.95 | -3.21% |
| Monolithic Power Systems Inc | 83.98 | 17.24 | 19.70 | 4.85% | $0.12 | $0.25 | -1.3% |
| ON Semiconductor Corp | 16.34 | 4.39 | 4.33 | 7.37% | $0.79 | $0.94 | -4.06% |
| GLOBALFOUNDRIES Inc | 29.85 | 2.72 | 4.11 | 2.53% | $0.73 | $0.53 | 0.11% |
| ASE Technology Holding Co Ltd | 22.14 | 2.30 | 1.19 | 3.17% | $28.28 | $25.76 | 4.16% |
| United Microelectronics Corp | 8.78 | 1.75 | 2.59 | 4.72% | $29.0 | $20.46 | -24.3% |
| Skyworks Solutions Inc | 18.60 | 2.70 | 3.62 | 3.76% | $0.37 | $0.51 | -9.61% |
| First Solar Inc | 20.25 | 2.50 | 5.07 | 5.38% | $0.47 | $0.5 | 15.58% |
| Lattice Semiconductor Corp | 42.86 | 15.76 | 15.04 | 14.98% | $0.05 | $0.12 | -3.05% |
| Universal Display Corp | 40.79 | 5.66 | 14.29 | 4.36% | $0.08 | $0.12 | -6.34% |
| Rambus Inc | 20.96 | 6.56 | 15.17 | 5.87% | $0.07 | $0.1 | -0.12% |
| MACOM Technology Solutions Holdings Inc | 90.43 | 6.62 | 10.79 | 1.27% | $0.03 | $0.09 | -12.75% |
| Allegro Microsystems Inc | 27.26 | 5.29 | 5.62 | 2.99% | $0.06 | $0.13 | 2.49% |
| Average | 132.31 | 8.97 | 11.13 | 6.36% | $4.31 | $4.27 | 9.88% |
By thoroughly analyzing Broadcom, we can discern the following trends:
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With a Price to Earnings ratio of 42.52, which is 0.32x less than the industry average, the stock shows potential for growth at a reasonable price, making it an interesting consideration for market participants.
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The elevated Price to Book ratio of 27.09 relative to the industry average by 3.02x suggests company might be overvalued based on its book value.
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With a relatively high Price to Sales ratio of 16.72, which is 1.5x 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 8.94% above the industry average. This suggests efficient use of equity to generate profits and demonstrates profitability and growth potential.
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The Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of $5.3 Billion is 1.23x above the industry average, highlighting stronger profitability and robust cash flow generation.
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The company has higher gross profit of $6.41 Billion, which indicates 1.5x above the industry average, indicating 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 9.88%. This suggests a potential struggle in generating increased sales volume.
Debt To Equity Ratio
The debt-to-equity (D/E) ratio helps evaluate the capital structure and financial leverage 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.
When examining Broadcom in comparison to its top 4 peers with respect to the Debt-to-Equity ratio, the following information becomes apparent:
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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
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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