Inquiry Into Broadcom's Competitor Dynamics In Semiconductors & Semiconductor Equipment Industry
In today's rapidly changing and highly competitive business world, it is vital for investors and industry enthusiasts to carefully assess companies. In this article, we will perform a comprehensive industry comparison, evaluating Broadcom (NASDAQ:AVGO) against its key competitors in the Semiconductors & Semiconductor Equipment industry. By analyzing important 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 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 | 70.56 | 10.90 | 17.27 | 3.02% | $5.58 | $7.78 | 42.99% |
| NVIDIA Corp | 71.73 | 61.36 | 38.32 | 32.31% | $17.75 | $20.41 | 262.12% |
| Advanced Micro Devices Inc | 223.19 | 4.43 | 11.02 | 0.22% | $0.9 | $2.56 | 2.24% |
| Qualcomm Inc | 25.78 | 8.82 | 5.99 | 9.79% | $3.08 | $5.28 | 1.23% |
| Texas Instruments Inc | 30.89 | 10.49 | 10.81 | 6.52% | $1.77 | $2.1 | -16.4% |
| ARM Holdings PLC | 592.07 | 33.98 | 55.47 | 4.35% | $0.06 | $0.89 | 46.6% |
| Intel Corp | 33.97 | 1.32 | 2.53 | -0.36% | $2.09 | $5.22 | 8.61% |
| Analog Devices Inc | 53.81 | 3.24 | 11.01 | 0.85% | $0.93 | $1.18 | -33.83% |
| Microchip Technology Inc | 25.78 | 7.23 | 6.44 | 2.25% | $0.47 | $0.79 | -40.62% |
| Monolithic Power Systems Inc | 100.88 | 19.49 | 22.62 | 4.45% | $0.1 | $0.25 | 1.51% |
| STMicroelectronics NV | 10.32 | 2.13 | 2.30 | 3.04% | $1.06 | $1.44 | -18.41% |
| ON Semiconductor Corp | 14.98 | 3.89 | 3.99 | 5.7% | $0.71 | $0.85 | -4.95% |
| GLOBALFOUNDRIES Inc | 33.40 | 2.64 | 4.22 | 1.19% | $0.54 | $0.39 | -15.86% |
| ASE Technology Holding Co Ltd | 22.73 | 2.71 | 1.36 | 1.94% | $23.55 | $20.87 | 1.46% |
| First Solar Inc | 23.38 | 3.46 | 6.72 | 3.48% | $0.36 | $0.35 | 44.83% |
| United Microelectronics Corp | 11.65 | 1.69 | 2.83 | 2.9% | $24.0 | $16.9 | 0.78% |
| Skyworks Solutions Inc | 22.13 | 2.96 | 4.17 | 2.91% | $0.31 | $0.42 | -9.29% |
| Universal Display Corp | 50.27 | 7.39 | 18.02 | 3.86% | $0.07 | $0.13 | 26.67% |
| Lattice Semiconductor Corp | 36.65 | 11.52 | 11.49 | 2.15% | $0.03 | $0.1 | -23.6% |
| MACOM Technology Solutions Holdings Inc | 119.66 | 7.34 | 12.07 | 1.45% | $0.04 | $0.1 | 6.98% |
| Cirrus Logic Inc | 28.10 | 4.05 | 4.31 | 2.48% | $0.07 | $0.19 | -0.27% |
| Average | 76.57 | 10.01 | 11.78 | 4.57% | $3.89 | $4.02 | 11.99% |
By conducting a comprehensive analysis of Broadcom, the following trends become evident:
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A Price to Earnings ratio of 70.56 significantly below the industry average by 0.92x suggests undervaluation. This can make the stock appealing for those seeking growth.
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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 10.9 which exceeds the industry average by 1.09x.
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The Price to Sales ratio of 17.27, which is 1.47x 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 3.02% is 1.55% below the industry average, suggesting potential inefficiency in utilizing equity to generate profits.
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The Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of $5.58 Billion is 1.43x above the industry average, highlighting stronger profitability and robust cash flow generation.
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The company has higher gross profit of $7.78 Billion, which indicates 1.94x above the industry average, indicating stronger profitability and higher earnings from its core operations.
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With a revenue growth of 42.99%, which surpasses the industry average of 11.99%, the company is demonstrating robust sales expansion and gaining market share.
Debt To Equity Ratio
The debt-to-equity (D/E) ratio helps evaluate the capital structure and financial leverage 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 has a higher debt-to-equity ratio of 1.06 compared to its top 4 peers.
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This indicates a higher level of financial risk as the company relies more heavily on borrowed funds. Investors may perceive this as a potential concern.
Key Takeaways
The low P/E ratio suggests Broadcom is 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 favorably. In terms of profitability, Broadcom's low ROE may raise concerns, despite its high EBITDA and gross profit margins. The company's strong revenue growth potential could be a key factor for future performance.
This article was generated by Benzinga's automated content engine and reviewed by an editor.