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 | 131.24 | 11.56 | 16.09 | -2.77% | $6.39 | $8.36 | 47.27% |
| NVIDIA Corp | 54.19 | 48.75 | 29.89 | 30.94% | $19.71 | $22.57 | 122.4% |
| Taiwan Semiconductor Manufacturing Co Ltd | 29.63 | 7.32 | 11.38 | 6.67% | $474.12 | $358.12 | 40.07% |
| Advanced Micro Devices Inc | 179.55 | 4.32 | 10.61 | 0.47% | $1.12 | $2.86 | 8.88% |
| Qualcomm Inc | 21.57 | 7.62 | 5.10 | 8.67% | $2.87 | $5.22 | 11.15% |
| Texas Instruments Inc | 34.90 | 10.68 | 11.48 | 6.59% | $1.76 | $2.21 | -15.65% |
| ARM Holdings PLC | 338.23 | 25.32 | 41.01 | 4.07% | $0.23 | $0.91 | 39.11% |
| Analog Devices Inc | 67.88 | 3.18 | 11.60 | 1.11% | $1.04 | $1.31 | -24.84% |
| Intel Corp | 89.46 | 0.80 | 1.66 | -1.46% | $0.86 | $4.55 | -0.9% |
| Monolithic Power Systems Inc | 103.25 | 19.26 | 22.38 | 4.66% | $0.13 | $0.28 | 15.03% |
| Microchip Technology Inc | 30.68 | 6.45 | 6.38 | 1.98% | $0.41 | $0.74 | -45.76% |
| ON Semiconductor Corp | 16.27 | 3.67 | 4.03 | 4.11% | $0.58 | $0.78 | -17.15% |
| First Solar Inc | 21.43 | 3.54 | 6.85 | 4.94% | $0.48 | $0.5 | 24.65% |
| STMicroelectronics NV | 7.43 | 1.43 | 1.73 | 3.51% | $1.31 | $1.15 | -25.29% |
| GLOBALFOUNDRIES Inc | 26.79 | 1.92 | 3.16 | 1.38% | $0.56 | $0.4 | -11.54% |
| United Microelectronics Corp | 12.80 | 1.90 | 2.99 | 3.76% | $27.9 | $19.98 | 0.89% |
| ASE Technology Holding Co Ltd | 19.54 | 2.23 | 1.16 | 2.62% | $26.08 | $23.07 | 2.91% |
| Skyworks Solutions Inc | 19.99 | 2.44 | 3.57 | 1.9% | $0.25 | $0.36 | -15.47% |
| Universal Display Corp | 43.92 | 6.36 | 15.65 | 3.47% | $0.07 | $0.12 | 8.15% |
| MACOM Technology Solutions Holdings Inc | 102.57 | 6.78 | 10.90 | 1.88% | $0.04 | $0.1 | 28.25% |
| Lattice Semiconductor Corp | 37.66 | 10.10 | 11.35 | 3.28% | $0.04 | $0.08 | -34.72% |
| Cirrus Logic Inc | 23.01 | 3.58 | 3.74 | 2.3% | $0.07 | $0.19 | 17.98% |
| Average | 60.99 | 8.46 | 10.32 | 4.61% | $26.65 | $21.21 | 6.1% |
When conducting a detailed analysis of Broadcom, the following trends become clear:
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The current Price to Earnings ratio of 131.24 is 2.15x higher than the industry average, indicating the stock is priced at a premium level according to the market sentiment.
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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 11.56 which exceeds the industry average by 1.37x.
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The stock's relatively high Price to Sales ratio of 16.09, surpassing the industry average by 1.56x, may indicate an aspect of overvaluation in terms of sales performance.
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The company has a lower Return on Equity (ROE) of -2.77%, which is 7.38% 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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With lower Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of $6.39 Billion, which is 0.24x below the industry average, the company may face lower profitability or financial challenges.
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With lower gross profit of $8.36 Billion, which indicates 0.39x below the industry average, the company may experience lower revenue after accounting for production costs.
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The company's revenue growth of 47.27% exceeds the industry average of 6.1%, indicating strong sales performance and market outperformance.
Debt To Equity Ratio
The debt-to-equity (D/E) ratio helps evaluate the capital structure and financial leverage of a company.
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 examining Broadcom in comparison to its top 4 peers with respect to the Debt-to-Equity ratio, the following information becomes apparent:
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Broadcom has a higher debt-to-equity ratio of 1.07 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
For Broadcom, the PE, PB, and PS ratios are all high compared to industry peers, indicating overvaluation. The low ROE, EBITDA, and gross profit suggest lower profitability levels for Broadcom relative to its competitors. However, the high revenue growth rate may present an opportunity for potential growth in the future.
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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