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 ARM Holdings ARM 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.
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 | 1801.67 | 30.60 | 52.12 | 1.78% | $0.18 | $0.79 | 13.81% |
| NVIDIA Corp | 95.37 | 53.68 | 40.11 | 30.42% | $10.96 | $13.4 | 205.51% |
| Broadcom Inc | 38.38 | 24.70 | 15.09 | 15.3% | $5.3 | $6.41 | 4.09% |
| Advanced Micro Devices Inc | 324.36 | 4.97 | 12.32 | 1.2% | $1.22 | $2.91 | 10.16% |
| Intel Corp | 110.08 | 1.76 | 3.42 | 2.57% | $5.57 | $7.05 | 9.71% |
| Qualcomm Inc | 21.84 | 7.41 | 4.75 | 12.4% | $3.58 | $5.62 | 4.99% |
| Texas Instruments Inc | 22.79 | 8.67 | 8.42 | 8.14% | $1.98 | $2.43 | -12.7% |
| Analog Devices Inc | 29.63 | 2.71 | 7.98 | 1.39% | $1.18 | $1.65 | -16.36% |
| Microchip Technology Inc | 19.60 | 6.40 | 5.41 | 9.66% | $0.75 | $1.12 | 8.74% |
| STMicroelectronics NV | 10.28 | 2.47 | 2.50 | 6.69% | $1.43 | $1.95 | -3.36% |
| ON Semiconductor Corp | 16.55 | 4.44 | 4.38 | 7.37% | $0.79 | $0.94 | -4.06% |
| GLOBALFOUNDRIES Inc | 21.98 | 2.86 | 4.06 | 2.34% | $0.64 | $0.53 | -10.7% |
| ASE Technology Holding Co Ltd | 20.95 | 2.18 | 1.12 | 3.06% | $28.07 | $24.92 | -18.27% |
| United Microelectronics Corp | 9.09 | 1.81 | 2.68 | 4.72% | $29.0 | $20.46 | -24.3% |
| Skyworks Solutions Inc | 18.82 | 2.73 | 3.67 | 3.76% | $0.37 | $0.51 | -9.61% |
| First Solar Inc | 35.57 | 2.67 | 5.33 | 4.35% | $0.37 | $0.38 | 27.37% |
| Lattice Semiconductor Corp | 37.97 | 14.01 | 13.32 | 8.96% | $0.07 | $0.13 | 11.4% |
| Universal Display Corp | 42.32 | 6.25 | 14.78 | 3.77% | $0.06 | $0.11 | -12.13% |
| Rambus Inc | 19.27 | 6.01 | 13.95 | 5.87% | $0.06 | $0.1 | 16.08% |
| MACOM Technology Solutions Holdings Inc | 81.82 | 5.99 | 9.76 | 2.63% | $0.03 | $0.09 | -15.59% |
| Allegro Microsystems Inc | 27.75 | 5.39 | 5.72 | 2.99% | $0.06 | $0.13 | 2.49% |
| Average | 50.22 | 8.36 | 8.94 | 6.88% | $4.57 | $4.54 | 8.67% |
By closely examining ARM Holdings, we can identify the following trends:
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At 1801.67, the stock's Price to Earnings ratio significantly exceeds the industry average by 35.88x, 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 30.6 which exceeds the industry average by 3.66x.
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The Price to Sales ratio of 52.12, which is 5.83x the industry average, suggests the stock could potentially be overvalued in relation to its sales performance compared to its peers.
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The Return on Equity (ROE) of 1.78% is 5.1% 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 $180 Million, which is 0.04x below the industry average. This potentially indicates lower profitability or financial challenges.
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The company has lower gross profit of $790 Million, which indicates 0.17x below the industry average. This potentially indicates lower revenue after accounting for production costs.
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The company is experiencing remarkable revenue growth, with a rate of 13.81%, outperforming the industry average of 8.67%.
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.
By analyzing ARM Holdings in relation to its top 4 peers based on the Debt-to-Equity ratio, the following insights can be derived:
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ARM Holdings has a stronger financial position compared to its top 4 peers, as evidenced by its lower debt-to-equity ratio of 0.05.
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This suggests that the company has a more favorable balance between debt and equity, which can be perceived as a positive indicator 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. 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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