In today’s fast-paced and competitive business landscape, it is essential for investors and industry enthusiasts to thoroughly analyze companies before making investment decisions. 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 | 69.86 | 19.44 | 25.31 | 11.02% | $9.86 | $12.25 | 28.18% |
| NVIDIA Corp | 47.41 | 39.15 | 25.16 | 29.14% | $38.75 | $41.85 | 62.49% |
| Micron Technology Inc | 41.38 | 8.33 | 11.61 | 9.28% | $8.35 | $7.65 | 56.65% |
| Advanced Micro Devices Inc | 132.32 | 6.77 | 12.88 | 2.06% | $2.11 | $4.78 | 35.59% |
| Texas Instruments Inc | 39.66 | 12.05 | 11.16 | 7.07% | $2.24 | $2.72 | -6.73% |
| Qualcomm Inc | 30.48 | 7.69 | 3.81 | -12.88% | $3.51 | $6.24 | 10.03% |
| Analog Devices Inc | 69.65 | 4.59 | 14.32 | 2.32% | $1.47 | $1.94 | 25.91% |
| Marvell Technology Inc | 29.44 | 5.05 | 9.32 | 13.84% | $2.58 | $1.07 | 36.83% |
| NXP Semiconductors NV | 29.67 | 6.01 | 5.08 | 6.43% | $1.11 | $1.79 | -2.37% |
| Monolithic Power Systems Inc | 29.80 | 15.60 | 21.02 | 5.12% | $0.21 | $0.41 | 18.88% |
| ON Semiconductor Corp | 88.95 | 3.30 | 4.39 | 3.22% | $0.44 | $0.59 | -11.98% |
| First Solar Inc | 19.14 | 2.97 | 5.31 | 5.19% | $0.61 | $0.61 | 79.67% |
| Credo Technology Group Holding Ltd | 111.78 | 18.21 | 31.11 | 7.99% | $0.09 | $0.18 | 272.08% |
| Tower Semiconductor Ltd | 80.37 | 5.49 | 10.41 | 1.9% | $0.13 | $0.09 | 6.79% |
| Rambus Inc | 59.28 | 10.40 | 19.96 | 3.84% | $0.08 | $0.14 | 22.68% |
| Lattice Semiconductor Corp | 424.20 | 16.43 | 23.69 | 0.4% | $0.01 | $0.09 | 4.92% |
| Average | 82.24 | 10.8 | 13.95 | 5.66% | $4.11 | $4.68 | 40.76% |
Upon closer analysis of Broadcom, the following trends become apparent:
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With a Price to Earnings ratio of 69.86, which is 0.85x less than the industry average, the stock shows potential for growth at a reasonable price, making it an interesting consideration for 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 19.44 which exceeds the industry average by 1.8x.
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The Price to Sales ratio of 25.31, which is 1.81x 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 company has a higher Return on Equity (ROE) of 11.02%, which is 5.36% above the industry average. This suggests efficient use of equity to generate profits and demonstrates profitability and growth potential.
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The Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of $9.86 Billion is 2.4x above the industry average, highlighting stronger profitability and robust cash flow generation.
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Compared to its industry, the company has higher gross profit of $12.25 Billion, which indicates 2.62x above the industry average, indicating stronger profitability and higher earnings from its core operations.
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The company is witnessing a substantial decline in revenue growth, with a rate of 28.18% compared to the industry average of 40.76%, which indicates a challenging sales environment.
Debt To Equity Ratio
The debt-to-equity (D/E) ratio is an important measure to assess the financial structure and risk profile of a company.
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, Broadcom stands in comparison with its top 4 peers, leading to the following comparisons:
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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 PE, PB, and PS ratios for Broadcom indicate that it may be overvalued compared to its peers in the Semiconductors & Semiconductor Equipment industry. However, its high ROE, EBITDA, gross profit, and low revenue growth suggest that the company is efficiently utilizing its resources and generating strong profits. This combination of high valuation multiples and strong operational performance positions Broadcom as a competitive player in the industry.
This article was generated by Benzinga’s automated content engine and reviewed by an editor.
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