Key Considerations Before Investing in AVGO

Now trading at a price of $1413.09, Broadcom has moved 6.2% so far today.

Broadcom returned gains of 67.9% last year, with its stock price reaching a high of $1445.4 and a low of $787.51. Over the same period, the stock outperformed the S&P 500 index by 43.9%. More recently, the company's 50-day average price was $1332.05. Broadcom Inc. designs, develops, and supplies various semiconductor devices with a focus on complex digital and mixed signal complementary metal oxide semiconductor based devices and analog III-V based products worldwide. Based in Palo Alto, CA, the Large-Cap Technology company has 20,000 full time employees. Broadcom has offered a 1.5% dividend yield over the last 12 months.

Wider Gross Margins Than the Industry Average of 45.29%:

2018 2019 2020 2021 2022 2023
Revenue (M) $20,848 $22,597 $23,888 $27,450 $33,203 $35,819
Gross Margins 51% 55% 56% 61% 67% 69%
Net Margins 59% 12% 12% 25% 35% 39%
Net Income (M) $12,259 $2,724 $2,960 $6,736 $11,495 $14,082
Net Interest Expense (M) $628 $1,444 $1,777 $1,885 $1,737 $1,622
Depreciation & Amort. (M) $515 $569 $570 $539 $529 $502
Diluted Shares (M) 431 419 421 429 423 427
Earnings Per Share $28.44 $6.43 $6.33 $15.0 $26.53 $32.98
EPS Growth n/a -77.39% -1.56% 136.97% 76.87% 24.31%
Avg. Price $200.54 $250.05 $293.02 $465.23 $551.77 $1413.09
P/E Ratio 6.84 36.94 44.26 29.63 20.11 41.65
Free Cash Flow (M) $8,245 $9,265 $11,598 $13,321 $16,312 $17,633
CAPEX (M) $635 $432 $463 $443 $424 $452
EV / EBITDA 16.79 32.39 33.46 24.27 17.46 41.09
Total Debt (M) $17,493 $35,585 $41,821 $39,955 $39,515 $39,229
Net Debt / EBITDA 2.34 7.61 7.46 3.07 1.84 1.5
Current Ratio 3.9 1.44 1.87 2.64 2.62 2.82

Broadcom has generally positive cash flows, an excellent current ratio of 2.82, and rapidly growing revenues and decreasing reinvestment in the business. The company also benefits from wider gross margins than its peer group, positive EPS growth, and healthy leverage levels.

Broadcom's Valuation Is in Line With Its Sector Averages:

Broadcom has a trailing twelve month P/E ratio of 49.6, compared to an average of 32.54 for the Technology sector. Based on its EPS guidance of $57.15, the company has a forward P/E ratio of 23.3. The 10.5% compound average growth rate of Broadcom's historical and projected earnings per share yields a PEG ratio of 4.73. This suggests that these shares are overvalued. Furthermore, Broadcom is likely overvalued compared to the book value of its equity, since its P/B ratio of 23.86 is higher than the sector average of 4.25. Ultimately, Broadcom's strong cash flows, decent earnings multiple, and healthy debt levels factor towards it being fairly valued, its elevated P/B ratio notwithstanding.

Broadcom Has an Average Rating of Buy:

The 28 analysts following Broadcom have set target prices ranging from $1110.0 to $1720.0 per share, for an average of $1533.04 with a buy rating. The company is trading -7.8% away from its average target price, indicating that there is an analyst consensus of some upside potential.

Broadcom has a very low short interest because 1.3% of the company's shares are sold short. Institutions own 80.1% of the company's shares, and the insider ownership rate stands at 2.04%, suggesting a large amount of insider shareholders. The largest shareholder is Vanguard Group Inc, whose 10% stake in the company is worth $63,096,265,837.

The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.

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