In today's rapidly changing and highly competitive business world, it is vital for investors and industry enthusiasts to carefully assess companies. In this article, we will perform a comprehensive industry comparison, evaluating Broadcom AVGO against its key competitors in the Semiconductors & Semiconductor Equipment industry. By analyzing important 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 | 52.32 | 9.28 | 15.81 | 2.81% | $4.61 | $7.38 | 34.17% |
| NVIDIA Corp | 62.30 | 53.29 | 33.28 | 32.31% | $17.75 | $20.41 | 17.83% |
| Taiwan Semiconductor Manufacturing Co Ltd | 30.75 | 7.36 | 11.92 | 6.38% | $428.26 | $314.51 | 16.52% |
| Advanced Micro Devices Inc | 241.10 | 4.78 | 11.91 | 0.22% | $0.9 | $2.56 | -11.27% |
| Qualcomm Inc | 28.05 | 9.59 | 6.51 | 9.79% | $3.08 | $5.28 | 1.23% |
| Texas Instruments Inc | 31.02 | 10.68 | 10.86 | 6.52% | $1.77 | $2.1 | -16.4% |
| Intel Corp | 31.67 | 1.23 | 2.35 | -0.36% | $1.83 | $5.22 | -17.41% |
| ARM Holdings PLC | 395.31 | 22.52 | 37.04 | 4.35% | $0.06 | $0.89 | 12.62% |
| Analog Devices Inc | 54.32 | 3.27 | 11.12 | 0.85% | $0.93 | $1.18 | -33.83% |
| Microchip Technology Inc | 28.23 | 7.92 | 7.05 | 2.25% | $0.47 | $0.79 | -40.62% |
| STMicroelectronics NV | 10.74 | 2.21 | 2.39 | 3.04% | $1.06 | $1.44 | -18.41% |
| Monolithic Power Systems Inc | 89.79 | 17.35 | 20.13 | 4.45% | $0.1 | $0.25 | 1.51% |
| ON Semiconductor Corp | 14.81 | 3.84 | 3.95 | 5.7% | $0.71 | $0.85 | -4.95% |
| First Solar Inc | 29.01 | 4.29 | 8.34 | 5.38% | $0.36 | $0.35 | 15.58% |
| GLOBALFOUNDRIES Inc | 31.52 | 2.51 | 3.98 | 1.19% | $0.54 | $0.39 | -15.86% |
| ASE Technology Holding Co Ltd | 22.42 | 2.67 | 1.34 | 1.94% | $23.55 | $20.87 | 1.46% |
| United Microelectronics Corp | 12.64 | 1.83 | 3.07 | 2.9% | $24.0 | $16.9 | 0.78% |
| Skyworks Solutions Inc | 17.36 | 2.33 | 3.27 | 2.91% | $0.31 | $0.42 | -9.29% |
| Lattice Semiconductor Corp | 49.08 | 15.43 | 15.39 | 2.15% | $0.03 | $0.1 | -23.6% |
| Universal Display Corp | 38.39 | 5.64 | 13.76 | 3.86% | $0.07 | $0.13 | 26.67% |
| MACOM Technology Solutions Holdings Inc | 114.98 | 7.06 | 11.59 | 1.45% | $0.04 | $0.1 | 6.98% |
| Cirrus Logic Inc | 23.36 | 3.40 | 3.58 | 2.48% | $0.05 | $0.19 | -39.93% |
| Average | 64.61 | 9.01 | 10.61 | 4.75% | $24.09 | $18.81 | -6.21% |
By analyzing Broadcom, we can infer the following trends:
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The stock's Price to Earnings ratio of 52.32 is lower than the industry average by 0.81x, 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 9.28 which exceeds the industry average by 1.03x.
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With a relatively high Price to Sales ratio of 15.81, which is 1.49x the industry average, the stock might be considered overvalued based on sales performance.
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The company has a lower Return on Equity (ROE) of 2.81%, which is 1.94% below the industry average. This indicates potential inefficiency in utilizing equity to generate profits, which could be attributed to various factors.
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Compared to its industry, the company has lower Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of $4.61 Billion, which is 0.19x below the industry average, potentially indicating lower profitability or financial challenges.
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The company has lower gross profit of $7.38 Billion, which indicates 0.39x below the industry average. This potentially indicates lower revenue after accounting for production costs.
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With a revenue growth of 34.17%, which surpasses the industry average of -6.21%, the company is demonstrating robust sales expansion and gaining market share.
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.
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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Broadcom exhibits a higher debt-to-equity ratio of 1.08 compared to its top 4 peers.
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This suggests a higher level of debt in the company's capital structure, which can increase financial risk and impact the company's overall stability.
Key Takeaways
The low P/E ratio suggests Broadcom is undervalued compared to its peers in the Semiconductors & Semiconductor Equipment industry. However, the high P/B and P/S ratios indicate a potential overvaluation. In terms of ROE, EBITDA, and gross profit, Broadcom's performance is below industry standards, reflecting lower profitability and operational efficiency. On the other hand, the high revenue growth rate indicates a positive outlook for Broadcom's future earnings potential compared to its industry counterparts.
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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