In the ever-changing and fiercely competitive business landscape, conducting thorough company analysis is crucial for investors and industry experts. In this article, we will undertake a comprehensive industry comparison, evaluating Broadcom AVGO and its primary competitors in the Semiconductors & Semiconductor Equipment industry. By closely examining key financial metrics, market position, and growth prospects, our aim is 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 | 68.11 | 10.52 | 16.67 | 3.02% | $5.58 | $7.78 | 42.99% |
| NVIDIA Corp | 73.78 | 63.12 | 39.42 | 32.31% | $17.75 | $20.41 | 262.12% |
| Taiwan Semiconductor Manufacturing Co Ltd | 33.27 | 7.97 | 12.89 | 6.38% | $428.26 | $314.51 | 16.52% |
| Advanced Micro Devices Inc | 232.32 | 4.61 | 11.47 | 0.22% | $0.9 | $2.56 | 2.24% |
| Qualcomm Inc | 26.96 | 9.22 | 6.26 | 9.79% | $3.08 | $5.28 | 1.23% |
| Texas Instruments Inc | 30.29 | 10.43 | 10.61 | 6.52% | $1.77 | $2.1 | -16.4% |
| ARM Holdings PLC | 553.84 | 31.78 | 51.89 | 4.35% | $0.06 | $0.89 | 46.6% |
| Intel Corp | 31.71 | 1.24 | 2.36 | -0.36% | $2.09 | $5.22 | 8.61% |
| Analog Devices Inc | 53.85 | 3.24 | 11.02 | 0.85% | $0.93 | $1.18 | -33.83% |
| Microchip Technology Inc | 25.62 | 7.19 | 6.40 | 2.25% | $0.47 | $0.79 | -40.62% |
| Monolithic Power Systems Inc | 97.65 | 18.87 | 21.89 | 4.45% | $0.1 | $0.25 | 1.51% |
| STMicroelectronics NV | 10.28 | 2.12 | 2.29 | 3.04% | $1.06 | $1.44 | -18.41% |
| ON Semiconductor Corp | 13.85 | 3.59 | 3.69 | 5.7% | $0.71 | $0.85 | -4.95% |
| GLOBALFOUNDRIES Inc | 31.68 | 2.50 | 4 | 1.19% | $0.54 | $0.39 | -15.86% |
| First Solar Inc | 26.91 | 3.98 | 7.74 | 3.48% | $0.36 | $0.35 | 44.83% |
| ASE Technology Holding Co Ltd | 23.16 | 2.76 | 1.39 | 1.94% | $23.55 | $20.87 | 1.46% |
| United Microelectronics Corp | 13.06 | 1.89 | 3.17 | 2.9% | $24.0 | $16.9 | 0.78% |
| Skyworks Solutions Inc | 20.22 | 2.71 | 3.81 | 2.91% | $0.31 | $0.42 | -9.29% |
| Universal Display Corp | 45.20 | 6.64 | 16.20 | 3.86% | $0.07 | $0.13 | 26.67% |
| Lattice Semiconductor Corp | 36.45 | 11.46 | 11.43 | 2.15% | $0.03 | $0.1 | -23.6% |
| MACOM Technology Solutions Holdings Inc | 119.22 | 7.32 | 12.02 | 1.45% | $0.04 | $0.1 | 6.98% |
| Cirrus Logic Inc | 25.85 | 3.73 | 3.97 | 2.48% | $0.07 | $0.19 | -0.27% |
| Average | 72.63 | 9.83 | 11.62 | 4.66% | $24.1 | $18.81 | 12.21% |
Through a detailed examination of Broadcom, we can deduce the following trends:
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With a Price to Earnings ratio of 68.11, which is 0.94x 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 10.52 relative to the industry average by 1.07x suggests company might be overvalued based on its book value.
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The stock's relatively high Price to Sales ratio of 16.67, surpassing the industry average by 1.43x, may indicate an aspect of overvaluation in terms of sales performance.
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With a Return on Equity (ROE) of 3.02% that is 1.64% below the industry average, it appears that the company exhibits potential inefficiency in utilizing equity to generate profits.
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Compared to its industry, the company has lower Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of $5.58 Billion, which is 0.23x below the industry average, potentially indicating lower profitability or financial challenges.
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The gross profit of $7.78 Billion is 0.41x below that of its industry, suggesting potential lower revenue after accounting for production costs.
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The company is experiencing remarkable revenue growth, with a rate of 42.99%, outperforming the industry average of 12.21%.
Debt To Equity Ratio
The debt-to-equity (D/E) ratio gauges the extent to which a company has financed its operations through debt relative to 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.
In terms of the Debt-to-Equity ratio, Broadcom can be assessed by comparing it to its top 4 peers, resulting in the following observations:
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In terms of the debt-to-equity ratio, Broadcom has a relatively higher level of debt of 1.06 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 PE, PB, and PS ratios for Broadcom indicate that it may be overvalued compared to its peers in the Semiconductors & Semiconductor Equipment industry. The low ROE, EBITDA, and gross profit suggest that Broadcom's profitability and operational efficiency are below industry standards. However, the high revenue growth rate shows potential for future performance improvement.
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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