Comparative Study: Broadcom And Industry Competitors In Semiconductors & Semiconductor Equipment Industry

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.

By analyzing Broadcom, we can infer the following trends:

• At 62.01, the stock's Price to Earnings ratio significantly exceeds the industry average by 1.11x, suggesting a premium valuation relative to industry peers.

• With a Price to Book ratio of 9.58, which is 1.19x the industry average, Broadcom might be considered overvalued in terms of its book value, as it is trading at a higher multiple compared to its industry peers.

• With a relatively high Price to Sales ratio of 15.18, which is 1.61x the industry average, the stock might be considered overvalued based on sales performance.

• The Return on Equity (ROE) of 3.02% is 1.43% below the industry average, suggesting potential inefficiency in utilizing equity to generate profits.

• The Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of $5.58 Billion is 1.42x above the industry average, highlighting stronger profitability and robust cash flow generation.

• Compared to its industry, the company has higher gross profit of $7.78 Billion, which indicates 1.89x above the industry average, indicating stronger profitability and higher earnings from its core operations.

• The company is experiencing remarkable revenue growth, with a rate of 42.99%, outperforming the industry average of 9.81%.

Debt To Equity Ratio

The debt-to-equity (D/E) ratio indicates the proportion of debt and equity used by a company to finance its assets and operations.

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:

• Among its top 4 peers, Broadcom has a higher debt-to-equity ratio of 1.06.

• This implies a greater reliance on debt financing, which can expose the company to higher financial risk and potential challenges.

Key Takeaways

The high PE, PB, and PS ratios of Broadcom indicate that the company is relatively overvalued compared to its peers in the Semiconductors & Semiconductor Equipment industry. On the other hand, the low ROE suggests that Broadcom is less efficient in generating profits from shareholders' equity. The high EBITDA and gross profit figures reflect strong operational performance, while the high revenue growth rate indicates potential for future expansion.

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