Industry Comparison: Evaluating Broadcom Against Competitors In Semiconductors & Semiconductor Equipment Industry

In the fast-paced and highly competitive business world of today, conducting thorough company analysis is essential for investors and industry observers. In this article, we will conduct an extensive industry comparison, evaluating Broadcom AVGO in relation to its major competitors in the Semiconductors & Semiconductor Equipment industry. Through a detailed examination of key financial metrics, market standing, and growth prospects, our objective is to provide valuable insights and illuminate 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.

Through a thorough examination of Broadcom, we can discern the following trends:

• The Price to Earnings ratio of 34.02 is 0.31x lower than the industry average, indicating potential undervaluation for the stock.

• With a Price to Book ratio of 21.9, which is 2.92x 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.

• The stock's relatively high Price to Sales ratio of 13.38, surpassing the industry average by 1.45x, may indicate an aspect of overvaluation in terms of sales performance.

• With a Return on Equity (ROE) of 15.3% that is 8.81% above the industry average, it appears that the company exhibits efficient use of equity to generate profits.

• The company has lower Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of $5.3 Billion, which is 0.22x below the industry average. This potentially indicates lower profitability or financial challenges.

• Compared to its industry, the company has lower gross profit of $6.41 Billion, which indicates 0.34x below the industry average, potentially indicating lower revenue after accounting for production costs.

• The company is witnessing a substantial decline in revenue growth, with a rate of 4.09% compared to the industry average of 6.88%, which indicates a challenging sales environment.

Debt To Equity Ratio

The debt-to-equity (D/E) ratio is a financial metric that helps determine the level of financial risk associated with a company's capital structure.

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 stands in comparison with its top 4 peers, leading to the following comparisons:

• Broadcom exhibits a higher debt-to-equity ratio of 1.64 compared to its top 4 peers.

• This suggests a higher level of debt in the company's capital structure, which can increase financial risk and impact the company's overall stability.

Key Takeaways

Broadcom's low PE ratio suggests that it is undervalued compared to its peers in the Semiconductors & Semiconductor Equipment industry. The high PB and PS ratios indicate that the company's stock price may be overvalued relative to its book value and sales. On the other hand, Broadcom's high ROE suggests that it is generating strong returns on shareholder equity. The low EBITDA, gross profit, and revenue growth indicate potential challenges in the company's financial performance. Overall, Broadcom's valuation analysis suggests a mixed outlook for the company compared to its industry peers.

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