Broadcom Ltd. (AVGO, Financial), the U.S. global supplier of analog and digital semiconductors headquartered in Singapore, will release its financial results for the second quarter on Thursday.
The company, which is also a designer and developer of the aforementioned technologies, operates in the wired infrastructure and wireless communication markets as well as in the enterprise storage and industrial markets.
For the second quarter, analysts forecast that Broadcom will generate an EPS of $3.5 on average ranging between a low of $3.46 and a high of $3.56.
Source: Yahoo Finance
The average EPS, as forecast by 29 analysts, represents a 38.3% growth from the EPS of the same period of 2016. Concerning second-quarter revenue, analysts forecast an average figure of $4.11 billion.
Source: Yahoo Finance
The average estimate on revenue for the second quarter ranges between a low of $4.09 billion and a high of $4.16 billion. The average figure of revenue for the second quarter, as forecast by the analysts, represents a 15.30% growth from second quarter 2016 revenue.
The company has approximately $3.54 billion in cash on hand and securities as of the most recent quarter while the total debt amounts to $13.56 billion. The total debt to equity (MRQ) ratio is 71.26 versus an industry average of 21.88, according to reuters.com. This means that the company is more indebted than its peers, but Broadcom has an interest coverage ratio of 8.44 computed over the last 12 months, which shows that the company doesn’t have any difficulties paying interest expenses on the outstanding debt.
Concerning the ability of the company to meet its short-term obligations, Broadcom is in line with its industry: The quick ratio is 2.83 versus an industry average of 2.51. The current ratio is 3.46 versus an industry average of 3.13.
The stock is currently trading at $239.40 per share with a price-earnings (P/E) ratio of -50.77, a price-book (P/B) ratio of 5.05 and a price-sales (P/S) ratio of 6.53.
The forward P/E ratio is 15.02. When we combine this ratio with earnings forecast by analysts to be at $14.89 per share for the full year, Broadcom looks overvalued by the stock market according to the current share prices.
What makes Broadcom look overvalued by the market at the moment is the technology stock is trading close to its 52-week high of $241.60 per share. Broadcom’s 52-week low is $142.27.
Analysts suggest buying shares of Broadcom with an average target price of $252.26 per share, which represents only a 5% upside from the current share price. The recommendation rating for Broadcom is 1.8 out of 5. Broadcom gained 36% year to date on the Nasdaq stock exchange.
The stock annually grew more than 52.5% over the last five years and for the following next year’s period, analysts forecast a much lower annual growth of 15%.
Broadcom distributes an annual dividend of $4.08 per share through quarterly payments of $1.02 per share, for a dividend yield of 1.69%.
Disclosure: I have no position in Broadcom.
