In today's rapidly changing and highly competitive business world, it is imperative for investors and industry observers to carefully assess companies before making investment choices. In this article, we will undertake a comprehensive industry comparison, evaluating ARM Holdings ARM vis-à-vis its key competitors in the Semiconductors & Semiconductor Equipment industry. Through a detailed analysis of important financial indicators, market standing, and growth potential, our goal is to provide valuable insights and highlight company's performance in the industry.
ARM Holdings Background
Arm Holdings is the IP owner and developer of the ARM architecture (ARM stands for Acorn RISC Machine), which is used in 99% of the world's smartphone CPU cores, and it also has high market share in other battery-powered devices like wearables, tablets, or sensors. Arm licenses its architecture for a fee, offering different types of licenses depending on the flexibility the customer needs. Customers like Apple or Qualcomm buy architectural licenses, which allows them to modify the architecture and add or delete instructions to tailor the chips to their specific needs. Other clients directly buy off-the-shelf designs from Arm. Both off-the-shelf and architectural customers pay a royalty fee per chip shipped.
| Company | P/E | P/B | P/S | ROE | EBITDA (in billions) | Gross Profit (in billions) | Revenue Growth |
|---|---|---|---|---|---|---|---|
| ARM Holdings PLC | 128.31 | 12.28 | 19.47 | 2.54% | $0.15 | $0.64 | -2.46% |
| NVIDIA Corp | 102.23 | 38.01 | 32.27 | 23.79% | $7.41 | $9.46 | 101.48% |
| Broadcom Inc | 26.25 | 15.94 | 10.06 | 14.98% | $4.91 | $6.16 | 4.87% |
| Texas Instruments Inc | 18.55 | 7.82 | 7.24 | 10.44% | $2.34 | $2.81 | -13.53% |
| Qualcomm Inc | 14.51 | 5.99 | 3.24 | 8.93% | $2.41 | $4.66 | -22.72% |
| Analog Devices Inc | 21.67 | 2.21 | 6.32 | 2.44% | $1.53 | $1.96 | -1.07% |
| Microchip Technology Inc | 16.41 | 5.66 | 4.50 | 9.99% | $1.12 | $1.56 | 16.55% |
| STMicroelectronics NV | 8.30 | 2.25 | 2.09 | 7.28% | $1.64 | $2.11 | 2.55% |
| ON Semiconductor Corp | 13.07 | 3.73 | 3.49 | 8.05% | $0.87 | $1.03 | 4.13% |
| GLOBALFOUNDRIES Inc | 18.09 | 2.56 | 3.45 | 2.31% | $0.63 | $0.53 | -7.43% |
| United Microelectronics Corp | 7.32 | 1.80 | 2.31 | 4.72% | $29.0 | $20.46 | -24.3% |
| ASE Technology Holding Co Ltd | 14.43 | 1.79 | 0.88 | 3.06% | $28.07 | $24.92 | -18.27% |
| First Solar Inc | 97.84 | 2.53 | 5.10 | 2.86% | $0.26 | $0.31 | 30.55% |
| Skyworks Solutions Inc | 13.41 | 2.36 | 2.81 | 3.37% | $0.39 | $0.46 | -13.09% |
| Lattice Semiconductor Corp | 35.93 | 12.02 | 10.29 | 9.29% | $0.06 | $0.13 | 17.79% |
| Universal Display Corp | 31.51 | 4.85 | 10.74 | 3.75% | $0.07 | $0.11 | 7.33% |
| Rambus Inc | 20.68 | 6.19 | 12.96 | 19.78% | $0.11 | $0.08 | -1.07% |
| MACOM Technology Solutions Holdings Inc | 16.42 | 5.48 | 7.45 | 1.31% | $0.03 | $0.09 | -13.78% |
| Allegro Microsystems Inc | 20.96 | 4.83 | 4.84 | 6.11% | $0.08 | $0.16 | 27.8% |
| Average | 27.64 | 7.0 | 7.22 | 7.91% | $4.5 | $4.28 | 5.43% |
By thoroughly analyzing ARM Holdings, we can discern the following trends:
-
The Price to Earnings ratio of 128.31 for this company is 4.64x above the industry average, indicating a premium valuation associated with the stock.
-
The elevated Price to Book ratio of 12.28 relative to the industry average by 1.75x suggests company might be overvalued based on its book value.
-
The stock's relatively high Price to Sales ratio of 19.47, surpassing the industry average by 2.7x, may indicate an aspect of overvaluation in terms of sales performance.
-
The company has a lower Return on Equity (ROE) of 2.54%, which is 5.37% below the industry average. This indicates potential inefficiency in utilizing equity to generate profits, which could be attributed to various factors.
-
The Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of $150 Million is 0.03x below the industry average, suggesting potential lower profitability or financial challenges.
-
The gross profit of $640 Million is 0.15x below that of its industry, suggesting potential lower revenue after accounting for production costs.
-
The company's revenue growth of -2.46% is significantly below the industry average of 5.43%. This suggests a potential struggle in generating increased sales volume.
Debt To Equity Ratio
The debt-to-equity (D/E) ratio is a measure that indicates the level of debt a company has taken on relative to the value of its assets net of liabilities.
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, ARM Holdings can be assessed by comparing it to its top 4 peers, resulting in the following observations:
-
ARM Holdings demonstrates a stronger financial position compared to its top 4 peers in the sector.
-
With a lower debt-to-equity ratio of 0.05, the company relies less on debt financing and maintains a healthier balance between debt and equity, which can be viewed positively by investors.
Key Takeaways
ARM Holdings has a high PE ratio, indicating that its stock price is relatively high compared to its earnings. The high PB ratio suggests that the stock is trading at a premium to its book value. The high PS ratio indicates that the stock is trading at a premium to its sales. The low ROE suggests that the company is not generating a high return on its shareholders' equity. The low EBITDA and gross profit indicate that the company's profitability is relatively low. The low revenue growth suggests that the company's sales are not growing at a significant rate.
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.
Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.
