Evaluating Broadcom Against Peers 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 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	71.35	19.85	25.85	11.02%	$9.86	$12.25	28.18%
NVIDIA Corp	44.80	37	23.77	29.14%	$38.75	$41.85	62.49%
Taiwan Semiconductor Manufacturing Co Ltd	30.18	9.49	13.07	9.44%	$691.11	$588.54	30.31%
Advanced Micro Devices Inc	111.74	5.72	10.88	2.06%	$2.11	$4.78	35.59%
Micron Technology Inc	25.28	5.09	7.10	9.28%	$8.35	$7.65	56.65%
Qualcomm Inc	34.98	8.85	4.37	-12.88%	$3.51	$6.24	10.03%
Intel Corp	613.67	1.65	3.04	3.98%	$7.85	$5.22	2.78%
Texas Instruments Inc	32.11	9.63	9.34	8.21%	$2.24	$2.72	14.24%
Analog Devices Inc	60.18	3.97	12.37	2.32%	$1.47	$1.94	25.91%
ARM Holdings PLC	146.19	16.33	27.55	3.3%	$0.22	$1.11	34.48%
Marvell Technology Inc	29.61	5.07	9.37	13.84%	$2.58	$1.07	36.83%
NXP Semiconductors NV	27.97	5.67	4.79	6.43%	$1.11	$1.79	-2.37%
Monolithic Power Systems Inc	24.04	12.58	16.95	5.12%	$0.21	$0.41	18.88%
ASE Technology Holding Co Ltd	30.97	3.30	1.68	3.56%	$32.4	$28.88	5.29%
First Solar Inc	20.49	3.18	5.68	5.19%	$0.61	$0.61	79.67%
Credo Technology Group Holding Ltd	129.42	21.09	36.02	7.99%	$0.09	$0.18	272.08%
ON Semiconductor Corp	75.63	2.81	3.73	3.22%	$0.44	$0.59	-11.98%
STMicroelectronics NV	44.52	1.28	2.04	1.33%	$0.31	$1.06	-1.97%
United Microelectronics Corp	15.18	1.79	2.69	4.29%	$30.07	$17.62	-2.25%
Tower Semiconductor Ltd	68.84	4.69	8.92	1.9%	$0.13	$0.09	6.79%
Rambus Inc	45.89	8.05	15.45	3.84%	$0.08	$0.14	22.68%
Lattice Semiconductor Corp	376.70	14.59	21.03	0.4%	$0.01	$0.09	4.92%
Average	94.69	8.66	11.42	5.33%	$39.22	$33.93	33.38%

When conducting a detailed analysis of Broadcom, the following trends become clear:

• The Price to Earnings ratio of 71.35 is 0.75x lower than the industry average, indicating potential undervaluation for the stock.

• With a Price to Book ratio of 19.85, which is 2.29x 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.

• The stock's relatively high Price to Sales ratio of 25.85, surpassing the industry average by 2.26x, may indicate an aspect of overvaluation in terms of sales performance.

• The company has a higher Return on Equity (ROE) of 11.02%, which is 5.69% above the industry average. This suggests efficient use of equity to generate profits and demonstrates profitability and growth potential.

• With lower Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of $9.86 Billion, which is 0.25x below the industry average, the company may face lower profitability or financial challenges.

• The company has lower gross profit of $12.25 Billion, which indicates 0.36x below the industry average. This potentially indicates lower revenue after accounting for production costs.

• The company is witnessing a substantial decline in revenue growth, with a rate of 28.18% compared to the industry average of 33.38%, which indicates a challenging sales environment.

Debt To Equity Ratio

The debt-to-equity (D/E) ratio gauges the extent to which a company has financed its operations through debt relative to equity.

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.

When evaluating Broadcom alongside its top 4 peers in terms of the Debt-to-Equity ratio, the following insights arise:

• As Broadcom is in the middle of the list in terms of the debt-to-equity ratio, it suggests that the company has a moderate debt-to-equity ratio of 0.8 compared to the other companies.

• This position indicates a relatively balanced financial structure, where the company maintains a reasonable level of debt while also leveraging equity for financing its operations.

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 reflects strong profitability, while the low EBITDA, gross profit, and revenue growth indicate potential challenges in generating earnings and expanding operations.

This article was generated by Benzinga's automated content engine and reviewed by an editor.