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.
| Company | P/E | P/B | P/S | ROE | EBITDA (in billions) | Gross Profit (in billions) | Revenue Growth |
|---|---|---|---|---|---|---|---|
| Broadcom Inc | 135.27 | 11.91 | 16.58 | -2.77% | $6.39 | $8.36 | 47.27% |
| NVIDIA Corp | 54.78 | 49.29 | 30.21 | 30.94% | $19.71 | $22.57 | 122.4% |
| Taiwan Semiconductor Manufacturing Co Ltd | 30.12 | 7.44 | 11.57 | 6.67% | $474.12 | $358.12 | 40.07% |
| Advanced Micro Devices Inc | 190.17 | 4.57 | 11.24 | 0.47% | $1.12 | $2.86 | 8.88% |
| Qualcomm Inc | 21.20 | 7.49 | 5.01 | 8.67% | $2.87 | $5.22 | 11.15% |
| Texas Instruments Inc | 34.94 | 10.69 | 11.49 | 6.59% | $1.76 | $2.21 | -15.65% |
| ARM Holdings PLC | 336.13 | 25.17 | 40.75 | 4.07% | $0.23 | $0.91 | 39.11% |
| Micron Technology Inc | 143.29 | 2.46 | 4.47 | 1.99% | $3.63 | $2.74 | 13.79% |
| Analog Devices Inc | 67.37 | 3.16 | 11.51 | 1.11% | $1.04 | $1.31 | -24.84% |
| Intel Corp | 94.50 | 0.84 | 1.75 | -1.46% | $0.86 | $4.55 | -0.9% |
| Monolithic Power Systems Inc | 106.18 | 19.80 | 23.02 | 4.66% | $0.13 | $0.28 | 15.03% |
| Microchip Technology Inc | 30.87 | 6.49 | 6.42 | 1.98% | $0.41 | $0.74 | -45.76% |
| ON Semiconductor Corp | 16.18 | 3.65 | 4.01 | 4.11% | $0.58 | $0.78 | -17.15% |
| STMicroelectronics NV | 7.61 | 1.46 | 1.77 | 3.51% | $1.31 | $1.15 | -25.29% |
| First Solar Inc | 21.50 | 3.55 | 6.88 | 4.94% | $0.48 | $0.5 | 24.65% |
| GLOBALFOUNDRIES Inc | 26.41 | 1.89 | 3.12 | 1.38% | $0.56 | $0.4 | -11.54% |
| United Microelectronics Corp | 12.42 | 1.85 | 2.90 | 3.76% | $27.9 | $19.98 | 0.89% |
| ASE Technology Holding Co Ltd | 18.97 | 2.17 | 1.13 | 2.62% | $26.08 | $23.07 | 2.91% |
| Skyworks Solutions Inc | 19.70 | 2.40 | 3.52 | 1.9% | $0.25 | $0.36 | -15.47% |
| Universal Display Corp | 43.63 | 6.32 | 15.54 | 3.47% | $0.07 | $0.12 | 8.15% |
| MACOM Technology Solutions Holdings Inc | 108.12 | 7.15 | 11.49 | 1.88% | $0.04 | $0.1 | 28.25% |
| Lattice Semiconductor Corp | 37.71 | 10.11 | 11.36 | 3.28% | $0.04 | $0.08 | -34.72% |
| Cirrus Logic Inc | 22.13 | 3.44 | 3.60 | 2.3% | $0.07 | $0.19 | 17.98% |
| Average | 65.63 | 8.24 | 10.13 | 4.49% | $25.6 | $20.37 | 6.45% |
Upon analyzing Broadcom, the following trends can be observed:
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The current Price to Earnings ratio of 135.27 is 2.06x 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 11.91 which exceeds the industry average by 1.45x.
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The stock's relatively high Price to Sales ratio of 16.58, surpassing the industry average by 1.64x, may indicate an aspect of overvaluation in terms of sales performance.
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The Return on Equity (ROE) of -2.77% is 7.26% below the industry average, suggesting potential inefficiency in utilizing equity to generate profits.
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The Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of $6.39 Billion is 0.25x below the industry average, suggesting potential lower profitability or financial challenges.
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The gross profit of $8.36 Billion is 0.41x below that of its industry, suggesting potential lower revenue after accounting for production costs.
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With a revenue growth of 47.27%, which surpasses the industry average of 6.45%, the company is demonstrating robust sales expansion and gaining market share.
Debt To Equity Ratio
The debt-to-equity (D/E) ratio is a key indicator of a company's financial health and its reliance on debt financing.
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 evaluating Broadcom against its top 4 peers in terms of the Debt-to-Equity ratio, the following observations arise:
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Compared to its top 4 peers, Broadcom has a higher debt-to-equity ratio of 1.07, indicating a higher level of debt financing.
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This higher debt proportion can expose the company to increased financial risk and potential challenges.
Key Takeaways
For Broadcom, the PE, PB, and PS ratios are all high compared to its peers in the Semiconductors & Semiconductor Equipment industry, indicating potentially overvalued stock. The low ROE, EBITDA, and gross profit suggest lower profitability levels for Broadcom compared to industry peers. However, the high revenue growth rate may indicate potential for future growth and market expansion.
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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