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In the ever-changing and fiercely competitive business landscape, conducting thorough company analysis is crucial for investors and industry experts. In this article, we will undertake a comprehensive industry comparison, evaluating Broadcom (NASDAQ:AVGO) 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.
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 | 49.70 | 8.82 | 15.02 | 2.81% | $4.61 | $7.38 | 34.17% |
| NVIDIA Corp | 75.77 | 52.58 | 37.01 | 32.23% | $14.56 | $16.79 | 265.28% |
| Advanced Micro Devices Inc | 218.20 | 4.33 | 10.78 | 0.22% | $0.9 | $2.56 | -11.27% |
| Qualcomm Inc | 24.56 | 8.40 | 5.70 | 9.79% | $3.08 | $5.28 | 1.23% |
| Texas Instruments Inc | 29.26 | 10.07 | 10.24 | 6.52% | $1.77 | $2.1 | -16.4% |
| Intel Corp | 31.43 | 1.22 | 2.34 | -0.36% | $1.83 | $5.22 | -17.41% |
| ARM Holdings PLC | 404.24 | 23.03 | 37.87 | 4.35% | $0.06 | $0.89 | 12.62% |
| Analog Devices Inc | 37.21 | 2.91 | 9.06 | 1.3% | $1.12 | $1.47 | -22.68% |
| Microchip Technology Inc | 26.59 | 7.51 | 6.64 | 2.25% | $0.39 | $0.79 | -24.91% |
| STMicroelectronics NV | 10.39 | 2.14 | 2.32 | 3.04% | $1.06 | $1.44 | -18.41% |
| Monolithic Power Systems Inc | 83.80 | 16.19 | 18.78 | 4.45% | $0.1 | $0.25 | 1.51% |
| ON Semiconductor Corp | 14.76 | 3.83 | 3.94 | 5.7% | $0.71 | $0.85 | -4.95% |
| GLOBALFOUNDRIES Inc | 32.69 | 2.60 | 4.13 | 1.19% | $0.54 | $0.39 | -15.86% |
| ASE Technology Holding Co Ltd | 20.79 | 2.47 | 1.24 | 1.94% | $23.55 | $20.87 | 1.46% |
| First Solar Inc | 19.87 | 2.94 | 5.71 | 5.38% | $0.36 | $0.35 | 15.58% |
| United Microelectronics Corp | 10.87 | 1.91 | 2.91 | 3.43% | $23.32 | $17.81 | -18.98% |
| Skyworks Solutions Inc | 17.68 | 2.37 | 3.33 | 2.91% | $0.31 | $0.42 | -9.29% |
| Lattice Semiconductor Corp | 45.38 | 14.26 | 14.23 | 2.15% | $0.03 | $0.1 | -23.6% |
| Universal Display Corp | 37.60 | 5.53 | 13.48 | 3.86% | $0.07 | $0.13 | 26.67% |
| MACOM Technology Solutions Holdings Inc | 115.30 | 7.08 | 11.63 | 1.45% | $0.04 | $0.1 | 6.98% |
| Rambus Inc | 17.36 | 6.19 | 13.54 | 3.24% | $0.05 | $0.09 | 3.61% |
| Average | 63.69 | 8.88 | 10.74 | 4.75% | $3.69 | $3.89 | 7.56% |
By thoroughly analyzing Broadcom, we can discern the following trends:
The Price to Earnings ratio of 49.7 is 0.78x lower than the industry average, indicating potential undervaluation for the stock.
Considering a Price to Book ratio of 8.82, which is well below the industry average by 0.99x, the stock may be undervalued based on its book value compared to its peers.
With a relatively high Price to Sales ratio of 15.02, which is 1.4x the industry average, the stock might be considered overvalued based on sales performance.
With a Return on Equity (ROE) of 2.81% that is 1.94% below the industry average, it appears that the company exhibits potential inefficiency in utilizing equity to generate profits.
With higher Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of $4.61 Billion, which is 1.25x above the industry average, the company demonstrates stronger profitability and robust cash flow generation.
The company has higher gross profit of $7.38 Billion, which indicates 1.9x above the industry average, indicating stronger profitability and higher earnings from its core operations.
The company is experiencing remarkable revenue growth, with a rate of 34.17%, outperforming the industry average of 7.56%.
The debt-to-equity (D/E) ratio measures the financial leverage of a company by evaluating its debt relative 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.
When comparing Broadcom with its top 4 peers based on the Debt-to-Equity ratio, the following insights can be observed:
In terms of the debt-to-equity ratio, Broadcom has a relatively higher level of debt of 1.08 compared to its top 4 peers.
This could be seen as a potential risk factor for the company, as a higher debt burden may increase financial vulnerability.
The low P/E and P/B ratios suggest Broadcom may be undervalued compared to its peers in the Semiconductors & Semiconductor Equipment industry. However, the high P/S ratio indicates a potential overvaluation. The low ROE and high EBITDA and gross profit figures indicate a mixed performance in terms of profitability and operational efficiency. The high revenue growth suggests strong top-line expansion potential for Broadcom compared to its industry counterparts.
This article was generated by Benzinga's automated content engine and reviewed by an editor.
Posted In: AVGO
