Fundamental Analysis: BROADCOM (#AVGO)

Broadcom Inc. is an American designer, developer, manufacturer and global supplier of a wide range of semiconductor and infrastructure software products. Broadcom's product offerings serve the data center, networking, software, broadband, wireless, and storage and industrial markets.


On a general note Broadcom is a technology company that designs and develops infrastructure software. Its mainframe software solutions include solutions for the IBM.


⚡️Growth Factors:

American semiconductor manufacturer Broadcom looks very attractive due to the following factors:

1) Target price from JPM - $ 570.

Below Fair Value: AVGO ($470.77) is trading below our estimate of fair value ($570)

2) Dividends are paid at 3.1%

Notable Dividend: AVGO's dividend (3.06%) is higher than the bottom 25% of dividend payers in the US market (1.26%).

PE vs Industry: AVGO is poor value based on its PE Ratio (52x) compared to the US Semiconductor industry average (38x)



📖 Financial indicators:

Earnings vs Market: AVGO's earnings (23.8% per year) are forecast to grow faster than the US market (19.2% per year).

Future ROE: AVGO's Return on Equity is forecast to be very high in 3 years time (47%).

Earnings Trend: AVGO's earnings have grown significantly by 20.8% per year over the past 5 years.

Accelerating Growth: AVGO's earnings growth over the past year (44.5%) exceeds its 5-year average (20.8% per year).

Short Term Liabilities: AVGO's short term assets ($14.3B) exceed its short term liabilities ($6.7B).

Long Term Liabilities: AVGO's short term assets ($14.3B) do not cover its long term liabilities ($46.3B).

Reducing Debt: AVGO's debt to equity ratio has increased from 75.9% to 174.5% over the past 5 years.

Debt Coverage: AVGO's debt is well covered by operating cash flow (30.7%)

Below Fair Value: AVGO ($475.28) is trading below our estimate of fair value ($600.21)

OTB Global Investments

London, 23 March 2021



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