Long-established in the Semiconductors industry, Broadcom Inc (AVGO, Financial) has enjoyed a stellar reputation. It has recently witnessed a daily gain of 1.92%, juxtaposed with a three-month change of 33.23%. However, fresh insights from the GF Score hint at potential headwinds. Notably, its diminished rankings in financial strength, growth, and valuation suggest that the company might not live up to its historical performance. Join us as we dive deep into these pivotal metrics to unravel the evolving narrative of Broadcom Inc.
What Is the GF Score?
The GF Score is a stock performance ranking system developed by GuruFocus using five aspects of valuation, which has been found to be closely correlated to the long-term performances of stocks by backtesting from 2006 to 2021. The stocks with a higher GF Score generally generate higher returns than those with a lower GF Score. Therefore, when picking stocks, investors should invest in companies with high GF Scores. The GF Score ranges from 0 to 100, with 100 as the highest rank.
- Financial strength rank: 5/10
- Profitability rank: 9/10
- Growth rank: 10/10
- GF Value rank: 1/10
- Momentum rank: 0/10
Based on the above method, GuruFocus assigned Broadcom Inc a GF Score of 64 out of 100, which signals poor future outperformance potential.
Understanding Broadcom Inc's Business
Broadcom Inc, with a market cap of $643.89 billion and annual sales of $38.87 billion, is the sixth-largest semiconductor company globally. It has expanded into various software businesses, boasting over $30 billion in annual revenue. Broadcom Inc 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. The company is the product of consolidation, with its businesses being an amalgamation of former companies like legacy Broadcom and Avago Technologies in chips, as well as Brocade, CA Technologies, and Symantec in software.
Financial Strength Breakdown
Broadcom Inc's financial strength indicators present some concerning insights about the company's balance sheet health. The company's low cash-to-debt ratio at 0.16 indicates a struggle in handling existing debt levels. This could be a red flag for investors looking for companies with a solid financial foundation capable of weathering economic downturns or investing in growth opportunities.
Next Steps
Considering Broadcom Inc's financial strength, profitability, and growth metrics, the GF Score highlights the firm's unparalleled position for potential underperformance. While the company has a strong profitability rank, its low GF Value rank and non-existent Momentum rank raise questions about its ability to sustain its historical performance in the face of current market dynamics. Investors should weigh these factors carefully when considering Broadcom Inc as part of their investment portfolio.
GuruFocus Premium members can find more companies with strong GF Scores using the following screener link: GF Score Screen.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
