In today's fast-paced and competitive business landscape, it is essential for investors and industry enthusiasts to thoroughly analyze companies before making investment decisions. In this article, we will conduct a comprehensive industry comparison, evaluating Broadcom AVGO against its key competitors in the Semiconductors & Semiconductor Equipment industry. By examining key financial metrics, market position, and growth prospects, we aim 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 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 | 48.70 | 8.64 | 14.72 | 2.81% | $4.61 | $7.38 | 34.17% |
| NVIDIA Corp | 72.06 | 50 | 35.19 | 32.23% | $14.56 | $16.79 | 265.28% |
| Advanced Micro Devices Inc | 302.49 | 4.64 | 11.49 | 1.2% | $1.22 | $2.91 | 10.16% |
| Qualcomm Inc | 24.22 | 8.22 | 5.26 | 12.4% | $3.58 | $5.62 | 4.99% |
| Intel Corp | 90.78 | 1.46 | 2.82 | 2.57% | $5.57 | $7.05 | 9.71% |
| Texas Instruments Inc | 23.53 | 8.96 | 8.70 | 8.14% | $1.98 | $2.43 | -12.7% |
| ARM Holdings PLC | 1479.46 | 25.13 | 42.80 | 1.78% | $0.18 | $0.79 | 13.81% |
| Analog Devices Inc | 33.98 | 2.65 | 8.27 | 1.3% | $1.12 | $1.47 | -22.68% |
| Microchip Technology Inc | 20.02 | 6.54 | 5.52 | 5.97% | $0.75 | $1.12 | -18.6% |
| STMicroelectronics NV | 9.11 | 2.19 | 2.22 | 6.69% | $1.5 | $1.95 | -3.21% |
| Monolithic Power Systems Inc | 73.82 | 15.35 | 17.32 | 4.85% | $0.12 | $0.25 | -1.3% |
| ON Semiconductor Corp | 13.43 | 3.63 | 3.55 | 7.37% | $0.79 | $0.94 | -4.06% |
| GLOBALFOUNDRIES Inc | 25.83 | 2.35 | 3.56 | 2.53% | $0.73 | $0.53 | 0.11% |
| ASE Technology Holding Co Ltd | 21.74 | 2.56 | 1.31 | 4.45% | $29.8 | $25.76 | -9.49% |
| United Microelectronics Corp | 10.45 | 1.76 | 2.86 | 3.72% | $25.78 | $17.81 | -3.7% |
| First Solar Inc | 22.74 | 2.82 | 5.69 | 5.38% | $0.47 | $0.5 | 15.58% |
| Skyworks Solutions Inc | 17.77 | 2.58 | 3.46 | 3.76% | $0.37 | $0.51 | -9.61% |
| Lattice Semiconductor Corp | 40.22 | 14.79 | 14.11 | 14.98% | $0.05 | $0.12 | -3.05% |
| Universal Display Corp | 37.64 | 5.22 | 13.19 | 4.36% | $0.08 | $0.12 | -6.34% |
| MACOM Technology Solutions Holdings Inc | 93.85 | 6.87 | 11.19 | 1.27% | $0.03 | $0.09 | -12.75% |
| Rambus Inc | 19.60 | 6.17 | 14.19 | 5.87% | $0.07 | $0.1 | -0.12% |
| Average | 121.64 | 8.69 | 10.63 | 6.54% | $4.44 | $4.34 | 10.6% |
When closely examining Broadcom, the following trends emerge:
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With a Price to Earnings ratio of 48.7, which is 0.4x 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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Considering a Price to Book ratio of 8.64, which is well below the industry average by 0.99x, the stock may be undervalued based on its book value compared to its peers.
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The Price to Sales ratio of 14.72, which is 1.38x the industry average, suggests the stock could potentially be overvalued in relation to its sales performance compared to its peers.
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The Return on Equity (ROE) of 2.81% is 3.73% below the industry average, suggesting potential inefficiency in utilizing equity to generate profits.
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The company exhibits higher Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of $4.61 Billion, which is 1.04x above the industry average, implying stronger profitability and robust cash flow generation.
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Compared to its industry, the company has higher gross profit of $7.38 Billion, which indicates 1.7x above the industry average, indicating stronger profitability and higher earnings from its core operations.
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The company's revenue growth of 34.17% is notably higher compared to the industry average of 10.6%, showcasing exceptional sales performance and strong demand for its products or services.
Debt To Equity Ratio
The debt-to-equity (D/E) ratio provides insights into the proportion of debt a company has in relation to its equity and asset value.
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 considering the Debt-to-Equity ratio, Broadcom can be compared to its top 4 peers, leading to the following observations:
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In terms of the debt-to-equity ratio, Broadcom has a relatively higher level of debt of 1.08 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
The low PE and PB ratios suggest Broadcom is undervalued compared to its peers in the Semiconductors & Semiconductor Equipment industry. However, the high PS ratio indicates a potential overvaluation based on revenue. The low ROE implies lower profitability relative to its peers, while the high EBITDA, gross profit, and revenue growth signify strong operational performance and growth potential for Broadcom.
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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