In the fast-paced and cutthroat world of business, conducting thorough company analysis is essential for investors and industry experts. In this article, we will undertake a comprehensive industry comparison, evaluating Broadcom AVGO in comparison to its major competitors within the Semiconductors & Semiconductor Equipment industry. By analyzing crucial financial metrics, market position, and growth potential, our objective is to provide valuable insights for investors and offer a deeper understanding of company's performance in 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 | 65.85 | 10.17 | 16.12 | 3.02% | $5.58 | $7.78 | 42.99% |
| NVIDIA Corp | 50.63 | 45.55 | 27.92 | 30.94% | $19.71 | $22.57 | 122.4% |
| Taiwan Semiconductor Manufacturing Co Ltd | 28.47 | 7.03 | 10.93 | 6.67% | $474.12 | $358.12 | 40.07% |
| Advanced Micro Devices Inc | 163.02 | 3.92 | 9.64 | 0.47% | $1.12 | $2.86 | 8.88% |
| Texas Instruments Inc | 34.98 | 10.71 | 11.50 | 6.59% | $1.76 | $2.21 | -15.65% |
| Qualcomm Inc | 20.88 | 7.37 | 4.94 | 8.67% | $2.87 | $5.22 | 11.15% |
| ARM Holdings PLC | 305.80 | 22.90 | 37.08 | 4.07% | $0.23 | $0.91 | 39.11% |
| Analog Devices Inc | 65.89 | 3.09 | 11.25 | 1.11% | $1.04 | $1.31 | -24.84% |
| Intel Corp | 83.75 | 0.75 | 1.55 | -1.46% | $0.86 | $4.55 | -0.9% |
| Microchip Technology Inc | 30.44 | 6.40 | 6.33 | 1.98% | $0.41 | $0.74 | -45.76% |
| Monolithic Power Systems Inc | 99.84 | 18.62 | 21.64 | 4.66% | $0.13 | $0.28 | 15.03% |
| ON Semiconductor Corp | 16.12 | 3.63 | 3.99 | 4.11% | $0.58 | $0.78 | -17.15% |
| STMicroelectronics NV | 7.79 | 1.50 | 1.81 | 3.51% | $1.31 | $1.15 | -25.29% |
| GLOBALFOUNDRIES Inc | 29.23 | 2.09 | 3.45 | 1.38% | $0.56 | $0.4 | -11.54% |
| First Solar Inc | 18.99 | 3.14 | 6.07 | 4.94% | $0.48 | $0.5 | 24.65% |
| United Microelectronics Corp | 12.51 | 1.86 | 2.92 | 3.76% | $27.9 | $19.98 | 0.89% |
| ASE Technology Holding Co Ltd | 18.26 | 2.09 | 1.08 | 2.62% | $26.08 | $23.07 | 2.91% |
| Skyworks Solutions Inc | 21.04 | 2.57 | 3.76 | 1.9% | $0.25 | $0.36 | -15.47% |
| Universal Display Corp | 39.14 | 5.67 | 13.94 | 3.47% | $0.07 | $0.12 | 8.15% |
| Cirrus Logic Inc | 25.55 | 3.97 | 4.15 | 2.3% | $0.07 | $0.19 | 17.98% |
| MACOM Technology Solutions Holdings Inc | 98.95 | 6.54 | 10.51 | 1.88% | $0.04 | $0.1 | 28.25% |
| Lattice Semiconductor Corp | 31.65 | 8.49 | 9.54 | 3.28% | $0.04 | $0.08 | -34.72% |
| Average | 57.28 | 7.99 | 9.71 | 4.61% | $26.65 | $21.21 | 6.1% |
Through a meticulous analysis of Broadcom, we can observe the following trends:
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The Price to Earnings ratio of 65.85 for this company is 1.15x above the industry average, indicating a premium valuation associated with the stock.
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With a Price to Book ratio of 10.17, which is 1.27x 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.
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With a relatively high Price to Sales ratio of 16.12, which is 1.66x the industry average, the stock might be considered overvalued based on sales performance.
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The Return on Equity (ROE) of 3.02% is 1.59% below the industry average, suggesting potential inefficiency in utilizing equity to generate profits.
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The company has lower Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of $5.58 Billion, which is 0.21x below the industry average. This potentially indicates lower profitability or financial challenges.
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The gross profit of $7.78 Billion is 0.37x below that of its industry, suggesting potential lower revenue after accounting for production costs.
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With a revenue growth of 42.99%, which surpasses the industry average of 6.1%, 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.
When assessing Broadcom against its top 4 peers using the Debt-to-Equity ratio, the following comparisons can be made:
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Broadcom has a higher debt-to-equity ratio of 1.06 compared to its top 4 peers.
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This indicates a higher level of financial risk as the company relies more heavily on borrowed funds. Investors may perceive this as a potential concern.
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. Additionally, the low ROE, EBITDA, and gross profit suggest that Broadcom may be facing challenges in generating profits and operational efficiency. However, the high revenue growth rate of the company implies potential opportunities for future expansion and market share growth within the industry.
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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