In today’s rapidly changing and fiercely competitive business landscape, it is essential for investors and industry enthusiasts to thoroughly analyze companies. In this article, we will conduct a comprehensive industry comparison, evaluating Broadcom (NASDAQ:AVGO) against its key competitors in the Semiconductors & Semiconductor Equipment industry. By examining key financial metrics, market position, and growth prospects, we aim to provide valuable insights for investors and shed light on company’s performance within the industry.
Broadcom Background
Broadcom is one of the largest semiconductor companies in the world and has also expanded into infrastructure software. Its semiconductors primarily serve computing, wired connectivity, and wireless connectivity. It has a significant position in custom AI chips to train and run inference for large language models. It is primarily a fabless designer but holds some manufacturing in-house. 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 VMware, 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 | 73.23 | 20.37 | 26.54 | 11.02% | $9.86 | $12.25 | 28.18% |
| NVIDIA Corp | 46.83 | 38.68 | 24.85 | 29.14% | $38.75 | $41.85 | 62.49% |
| Taiwan Semiconductor Manufacturing Co Ltd | 30.92 | 9.73 | 13.38 | 9.44% | $691.11 | $588.54 | 30.31% |
| Advanced Micro Devices Inc | 112.51 | 5.76 | 10.95 | 2.06% | $2.11 | $4.78 | 35.59% |
| Micron Technology Inc | 26.26 | 5.29 | 7.37 | 9.28% | $8.35 | $7.65 | 56.65% |
| Qualcomm Inc | 34.88 | 8.83 | 4.36 | -12.88% | $3.51 | $6.24 | 10.03% |
| Intel Corp | 605.83 | 1.63 | 3 | 3.98% | $7.85 | $5.22 | 2.78% |
| Texas Instruments Inc | 32.26 | 9.68 | 9.39 | 8.21% | $2.24 | $2.72 | 14.24% |
| Analog Devices Inc | 60.69 | 4.01 | 12.47 | 2.32% | $1.47 | $1.94 | 25.91% |
| ARM Holdings PLC | 143.62 | 16.05 | 27.07 | 3.3% | $0.22 | $1.11 | 34.48% |
| Marvell Technology Inc | 30.87 | 5.29 | 9.77 | 13.84% | $2.58 | $1.07 | 36.83% |
| NXP Semiconductors NV | 27.93 | 5.66 | 4.78 | 6.43% | $1.11 | $1.79 | -2.37% |
| Monolithic Power Systems Inc | 24.21 | 12.67 | 17.07 | 5.12% | $0.21 | $0.41 | 18.88% |
| ASE Technology Holding Co Ltd | 31.62 | 3.37 | 1.72 | 3.56% | $32.4 | $28.88 | 5.29% |
| First Solar Inc | 20.67 | 3.21 | 5.73 | 5.19% | $0.61 | $0.61 | 79.67% |
| Credo Technology Group Holding Ltd | 127.42 | 20.76 | 35.46 | 7.99% | $0.09 | $0.18 | 272.08% |
| ON Semiconductor Corp | 76.29 | 2.83 | 3.76 | 3.22% | $0.44 | $0.59 | -11.98% |
| STMicroelectronics NV | 44.93 | 1.30 | 2.06 | 1.33% | $0.31 | $1.06 | -1.97% |
| United Microelectronics Corp | 14.88 | 1.75 | 2.63 | 4.29% | $30.07 | $17.62 | -2.25% |
| Tower Semiconductor Ltd | 69.99 | 4.77 | 9.07 | 1.9% | $0.13 | $0.09 | 6.79% |
| Lattice Semiconductor Corp | 382.65 | 14.82 | 21.37 | 0.4% | $0.01 | $0.09 | 4.92% |
| Rambus Inc | 44.85 | 7.87 | 15.10 | 3.84% | $0.08 | $0.14 | 22.68% |
| Average | 94.77 | 8.76 | 11.49 | 5.33% | $39.22 | $33.93 | 33.38% |
Through a thorough examination of Broadcom, we can discern the following trends:
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The stock’s Price to Earnings ratio of 73.23 is lower than the industry average by 0.77x, suggesting potential value in the eyes of market participants.
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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 20.37 which exceeds the industry average by 2.33x.
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The stock’s relatively high Price to Sales ratio of 26.54, surpassing the industry average by 2.31x, may indicate an aspect of overvaluation in terms of sales performance.
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The Return on Equity (ROE) of 11.02% is 5.69% above the industry average, highlighting efficient use of equity to generate profits.
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Compared to its industry, the company has lower Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of $9.86 Billion, which is 0.25x below the industry average, potentially indicating lower profitability or financial challenges.
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With lower gross profit of $12.25 Billion, which indicates 0.36x below the industry average, the company may experience lower revenue after accounting for production costs.
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The company’s revenue growth of 28.18% is significantly below the industry average of 33.38%. This suggests a potential struggle in generating increased sales volume.
Debt To Equity Ratio
The debt-to-equity (D/E) ratio indicates the proportion of debt and equity used by a company to finance its assets and operations.
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 considering the Debt-to-Equity ratio, Broadcom can be compared to its top 4 peers, leading to the following observations:
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Broadcom falls in the middle of the list when considering the debt-to-equity ratio.
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This indicates that the company has a moderate level of debt relative to its equity with a debt-to-equity ratio of 0.8, suggesting a balanced financial structure with a reasonable debt-equitymix.
Key Takeaways
The low P/E ratio suggests Broadcom may be undervalued compared to its peers in the Semiconductors & Semiconductor Equipment industry. However, the high P/B and P/S ratios indicate that the market values the company’s assets and sales more highly. On the other hand, Broadcom’s high ROE and low EBITDA, gross profit, and revenue growth may indicate potential challenges in generating profits and growth compared to industry peers.
This article was generated by Benzinga’s automated content engine and reviewed by an editor.
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