In the dynamic 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 ARM Holdings ARM and its primary competitors in the Semiconductors & Semiconductor Equipment industry. By closely examining key financial metrics, market position, and growth prospects, our aim is to provide valuable insights for investors and shed light on company's performance within 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 | 315.71 | 11.91 | 20.02 | -2.45% | $-0.12 | $0.76 | 27.94% |
| NVIDIA Corp | 118.14 | 43.93 | 37.29 | 23.79% | $7.41 | $9.46 | 101.48% |
| Taiwan Semiconductor Manufacturing Co Ltd | 18.87 | 4.91 | 7.61 | 6.46% | $392.33 | $296.64 | -10.83% |
| Broadcom Inc | 30.04 | 18.25 | 11.51 | 14.98% | $4.91 | $6.16 | 4.87% |
| Advanced Micro Devices Inc | 1072.73 | 3.47 | 8.66 | 0.54% | $1.13 | $2.75 | 4.22% |
| Qualcomm Inc | 19.78 | 6.65 | 4.05 | 7.05% | $2.06 | $4.75 | -24.26% |
| Texas Instruments Inc | 19.67 | 8.29 | 7.68 | 10.44% | $2.34 | $2.81 | -13.53% |
| Analog Devices Inc | 24.60 | 2.51 | 7.18 | 2.44% | $1.53 | $1.96 | -1.07% |
| Microchip Technology Inc | 18.09 | 6.41 | 5.10 | 9.66% | $1.1 | $1.53 | 8.74% |
| STMicroelectronics NV | 9.82 | 2.67 | 2.47 | 7.28% | $1.69 | $2.11 | 2.55% |
| GLOBALFOUNDRIES Inc | 22.11 | 2.88 | 4.09 | 2.34% | $0.64 | $0.53 | -10.7% |
| ON Semiconductor Corp | 14.34 | 4.09 | 3.83 | 8.05% | $0.87 | $1.03 | -0.54% |
| United Microelectronics Corp | 8.80 | 1.75 | 2.59 | 4.72% | $29.0 | $20.46 | -24.3% |
| ASE Technology Holding Co Ltd | 16.07 | 2 | 0.98 | 3.06% | $28.07 | $24.92 | -18.27% |
| First Solar Inc | 34.47 | 2.58 | 5.16 | 4.35% | $0.37 | $0.38 | 27.37% |
| Skyworks Solutions Inc | 15.35 | 2.47 | 3.16 | 4.09% | $0.4 | $0.48 | 13.78% |
| Lattice Semiconductor Corp | 39.90 | 13.37 | 11.43 | 8.96% | $0.06 | $0.13 | 1.1% |
| Universal Display Corp | 37.96 | 5.61 | 13.26 | 3.77% | $0.06 | $0.11 | -12.13% |
| Rambus Inc | 25.39 | 7.48 | 15.90 | 10.86% | $0.12 | $0.08 | -6.19% |
| MACOM Technology Solutions Holdings Inc | 63.98 | 6.15 | 9.03 | 2.63% | $0.05 | $0.09 | -15.59% |
| Allegro Microsystems Inc | 22.03 | 5.02 | 5.21 | 6.18% | $0.09 | $0.16 | 15.92% |
| Average | 81.61 | 7.52 | 8.31 | 7.08% | $23.71 | $18.83 | 2.13% |
Through an analysis of ARM Holdings, we can infer the following trends:
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At 315.71, the stock's Price to Earnings ratio significantly exceeds the industry average by 3.87x, suggesting a premium valuation relative to industry peers.
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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 1.58x.
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With a relatively high Price to Sales ratio of 20.02, which is 2.41x the industry average, the stock might be considered overvalued based on sales performance.
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The Return on Equity (ROE) of -2.45% is 9.53% 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 $-120 Million, which is -0.01x below the industry average. This potentially indicates lower profitability or financial challenges.
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Compared to its industry, the company has lower gross profit of $760 Million, which indicates 0.04x below the industry average, potentially indicating lower revenue after accounting for production costs.
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The company's revenue growth of 27.94% exceeds the industry average of 2.13%, indicating strong sales performance and market outperformance.
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.
In light of the Debt-to-Equity ratio, a comparison between ARM Holdings and its top 4 peers reveals the following information:
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ARM Holdings is in a relatively stronger financial position compared to its top 4 peers, as evidenced by its lower debt-to-equity ratio of 0.04.
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This implies that the company relies less on debt financing and has a more favorable balance between debt and equity.
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. However, the high revenue growth suggests that the company is experiencing strong sales growth compared to its peers in the Semiconductors & Semiconductor Equipment 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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