Market Analysis: Broadcom And Competitors In Semiconductors & Semiconductor Equipment Industry
In today's rapidly changing and highly competitive business world, it is imperative for investors and industry observers to carefully assess companies before making investment choices. In this article, we will undertake a comprehensive industry comparison, evaluating Broadcom (NASDAQ:AVGO) vis-à-vis its key competitors in the Semiconductors & Semiconductor Equipment industry. Through a detailed analysis of important financial indicators, market standing, and growth potential, our goal is to provide valuable insights and highlight company's performance in 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 is primarily a fabless designer but holds some manufacturing in-house, such as for its best-of-breed film bulk acoustic resonator 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 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 | 104.18 | 26.18 | 32.80 | 5.8% | $8.29 | $10.7 | 22.03% |
| NVIDIA Corp | 45.78 | 37.81 | 24.30 | 29.14% | $38.75 | $41.85 | 62.49% |
| Taiwan Semiconductor Manufacturing Co Ltd | 31.23 | 9.82 | 13.52 | 9.44% | $691.11 | $588.54 | 30.31% |
| Advanced Micro Devices Inc | 116.03 | 5.94 | 11.30 | 2.06% | $2.11 | $4.78 | 35.59% |
| Micron Technology Inc | 33.26 | 5.24 | 7.60 | 6.1% | $5.9 | $5.05 | 46.0% |
| Intel Corp | 675 | 1.82 | 3.34 | 3.98% | $7.85 | $5.22 | 2.78% |
| Qualcomm Inc | 35.13 | 8.89 | 4.39 | -12.88% | $3.51 | $6.24 | 10.03% |
| Texas Instruments Inc | 32.70 | 9.81 | 9.52 | 8.21% | $2.24 | $2.72 | 14.24% |
| ARM Holdings PLC | 181.96 | 20.33 | 34.29 | 3.3% | $0.22 | $1.11 | 34.48% |
| Analog Devices Inc | 60.58 | 4 | 12.45 | 2.32% | $1.47 | $1.94 | 25.91% |
| Marvell Technology Inc | 31.30 | 5.36 | 9.91 | 13.84% | $2.58 | $1.07 | 36.83% |
| NXP Semiconductors NV | 28.19 | 5.71 | 4.82 | 6.43% | $1.11 | $1.79 | -2.37% |
| Monolithic Power Systems Inc | 24.70 | 12.93 | 17.42 | 5.12% | $0.21 | $0.41 | 18.88% |
| ASE Technology Holding Co Ltd | 32.14 | 3.43 | 1.75 | 3.56% | $32.4 | $28.88 | 5.29% |
| Credo Technology Group Holding Ltd | 146.80 | 23.92 | 40.85 | 7.99% | $0.09 | $0.18 | 272.08% |
| First Solar Inc | 19.45 | 3.02 | 5.39 | 5.19% | $0.61 | $0.61 | 79.67% |
| ON Semiconductor Corp | 75.66 | 2.81 | 3.73 | 3.22% | $0.44 | $0.59 | -11.98% |
| STMicroelectronics NV | 44.72 | 1.29 | 2.05 | 1.33% | $0.31 | $1.06 | -1.97% |
| United Microelectronics Corp | 14.93 | 1.76 | 2.64 | 4.29% | $30.07 | $17.62 | -2.25% |
| Tower Semiconductor Ltd | 71.68 | 4.89 | 9.28 | 1.9% | $0.13 | $0.09 | 6.79% |
| Rambus Inc | 49.86 | 8.75 | 16.79 | 3.84% | $0.08 | $0.14 | 22.68% |
| Lattice Semiconductor Corp | 389.75 | 15.09 | 21.76 | 0.4% | $0.01 | $0.09 | 4.92% |
| Average | 101.95 | 9.17 | 12.24 | 5.18% | $39.1 | $33.81 | 32.88% |
By closely examining Broadcom, we can identify the following trends:
The current Price to Earnings ratio of 104.18 is 1.02x higher than the industry average, indicating the stock is priced at a premium level according to the market sentiment.
With a Price to Book ratio of 26.18, which is 2.85x the industry average, Broadcom might be considered overvalued in terms of its book value, as it is trading at a higher multiple compared to its industry peers.
With a relatively high Price to Sales ratio of 32.8, which is 2.68x the industry average, the stock might be considered overvalued based on sales performance.
The Return on Equity (ROE) of 5.8% is 0.62% above the industry average, highlighting efficient use of equity to generate profits.
The company has lower Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of $8.29 Billion, which is 0.21x below the industry average. This potentially indicates lower profitability or financial challenges.
The company has lower gross profit of $10.7 Billion, which indicates 0.32x below the industry average. This potentially indicates lower revenue after accounting for production costs.
The company's revenue growth of 22.03% is significantly below the industry average of 32.88%. This suggests a potential struggle in generating increased sales volume.
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.
By evaluating Broadcom against its top 4 peers in terms of the Debt-to-Equity ratio, the following observations arise:
Broadcom is positioned in the middle in terms of the debt-to-equity ratio compared to its top 4 peers.
This suggests a balanced financial structure, where the company maintains a moderate level of debt while also relying on equity financing with a debt-to-equity ratio of 0.88.
Key Takeaways
The high PE, PB, and PS ratios of Broadcom suggest that the company may be overvalued compared to its peers in the Semiconductors & Semiconductor Equipment industry. On the other hand, Broadcom's high ROE indicates strong profitability relative to its equity, while its low EBITDA, gross profit, and revenue growth may raise concerns about its operational performance within the industry.
This article was generated by Benzinga's automated content engine and reviewed by an editor.