Broadcom (AVGO:NAS) Fundamental Valuation Report


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Broadcom $265.64 (USD) Close Price as of 20/12/2017

Based on the analysis conducted in this report, Broadcom, (AVGO:NAS) is found to be  Fairly valued to slightly Undervalued.

Company Broadcom
Symbol:Exchange AVGO:NAS
Industry Technology:Semiconductors
Close Price/Date $265.64 (USD) 20/12/2017
Weighted Average Valuation $274.20 (USD)
Summary AVGO:NAS is found to be  Fairly valued to slightly Undervalued by 3.2% using the 3 valuation models shown below.
Valuation Models Used Analyst Consensus: $315.78 (USD)
(in order of importance) Discounted Cash Flow: $225.14 (USD)
Comparables: $247.60 (USD)
Valuation Methods Analysis This company is:
Cash Flow Basis: Overvalued on a Cash Flow Valuation basis
Comparable Company Basis: Overvalued on a Comparable Valuation basis
Asset Basis: Undervalued on an Asset Valuation basis

Valuation Details

Broadcom Valuations

Summary chart

 We have up to 6 valuation points for each company. Details are at the bottom of the report.

Discounted Cash Flow and Sensitivity Analysis for AVGO:NAS

Using a discounted cash flow model we generated an intrinsic value of $225.14 (USD) for AVGO:NAS

Sensitivity Analysis

(showing how changes in the input variables impact the DCF calculation)

AVGO:NAS Current Values Valuation If Dropped * Valuation If Raised *
Calculated Value: $225.14 1% 5% 1% 5%
WACC (or Ke) 9.70 $270.79 $191.36
Terminal Growth Rate 3.00 $195.33 $265.41
Tax Rate 0.25 $242.54 $207.74
Cash Flow 10,714,163,000 $211.73 $238.55
Capital Expenditures -417,200,000 $224.66 $225.62
Long Term Debt 13,715,000,000 $226.82 $223.46

* Changes are absolute: ex WACC from 8% to 7%

Comparables Model

Using similar companies and price based ratios we generated a valuation of $315.18 (USD) for AVGO:NAS. We also generated a valuation of $247.60 (USD) using other metrics and comparables.
The comparable companies were Analog Devices (ADI:NAS), Intel (INTC:NAS), NVIDIA (NVDA:NAS), NXP Semiconductors (NXPI:NAS) and Taiwan Semiconductor (TSM:NYS)

Company AVGO:NAS End Date Value
Cash/Share $0.00 (USD)
Book Value/Share $48.54 (USD)
MarketCap 108,375,635,596
1 Year Return 0.459
NetPPE 0
Price Based on Comps Adjustment Factor (%)
$0.00 (USD) 0
$263.26 (USD) 0
$228.28 (USD) 0
$251.26 (USD) 0
$0.00 (USD) 0
Ratios Used Average Values ADI:NAS INTC:NAS NVDA:NAS NXPI:NAS TSM:NYS
Cash / Share 23.35 3.05 1.14 2.74 5.44 104.37
Book Value / Share 18.04 22.17 14.27 10.01 35.13 8.62
Market Cap 101,585,271,029 28,902,482,287 176,550,163,057 86,867,228,083 36,664,586,536 178,941,895,184
1 Year Return 0.38 0.21 0.29 0.84 0.19 0.37
Net PPE 207,585,800,800 1,107,304,000 36,171,000,000 521,000,000 2,352,000,000 997,777,700,000

Multiples

Using a multiples approach we generated a valuation of  $248.90 (USD) for AVGO:NAS

Company AVGO:NAS End Date Value
Earnings/Share $4.27 (USD)
Book Value/Share $48.54 (USD)
Sales/Share $38.74 (USD)
Cash Flow/Share $13.60 (USD)
EBITDA/Share $5.99 (USD)
Price Based on Comps Adjustment Factor
$257.45 (USD) 0
$323.48 (USD) 0
$236.59 (USD) 0
$285.13 (USD) 0
$141.85 (USD) 0
Ratios Ratio Average
PE Ratio 60.29
PB Ratio 6.66
PS Ratio 6.11
PCF Ratio 20.96
EV to EBITDA 23.70

Adjusted Book Value versus Historical Price to Book

The average the Price to Book ratio for  AVGO:NAS for the last 8 years was  6.52

We ran the Adjusted Book Value for  AVGO:NAS and generated a book value of  $47.43 (USD)
By multiplying these we get an adjusted valuation of  $309.19 (USD)

Analyst Data

In the Stockcalc database there are 9 analysts that provide a valuation for AVGO:NAS. The 9 analysts have a concensus valuation for AVGO:NAS for 2018 of $315.78 (USD).

AVGO:NAS Broadcom

Analyst Recommendation
Buy Hold Sell Rating
(of 5)
Guidance As Of
10 0 0 4.7273 Buy 2017-12-19

Current Price: not available

Analyst Consensus
USD Millions 2017 2018 2019
Mean EPS 15.70 18.97 20.01
# EPS Analysts 10 10 9
Mean Revenue 17,649.20 20,505.20 21,552.90
# Revenue Analysts 8 8 7
Mean Target Price 315.78
Mean Cash Flow 22.58 18.70 21.58
Mean EBITDA 10,055.20 9,229.30 10,402.10
Mean Net Income 7,169.70 8,722.80 9,046.40
Mean Debt Outstanding -7,035.70 -1,315.90 4,461.60
Mean Tax Rate 3.92 5.73 8.45
Mean Growth Rate 13.81
Mean Capital Expenditure 1,109.00 928.30 872.20

Company Overview (AVGO:NAS USD)

Price 261.53
Range 261.07 – 266.25
52 week 173.31 – 285.68
Open 265.95
Vol / Avg. 4.00/3.24M
Mkt cap 106.70B
P/E 214.87
Div/yield 1.75/2.68
EPS 1.22
Shares 407.98M
Beta 1.05
Inst. own 91%
Summary chart

Detailed Company Description

Broadcom Ltd is engaged in designing, developing and supplying analog and digital semiconductor connectivity solutions. Its product portfolio serves wired infrastructure, wireless communications, enterprise storage and industrial and other end markets.

Explanation of Valuation Models

We have up to 6 valuation points for each company in the database.
The Discounted Cash Flow (DCF) valuation is a cash flow model where cash flow projections are discounted back to the present to calculate value per share. DCF is a common valuation technique especially for companies undergoing irregular cash flows such as resource companies (mining, forestry, oil and gas) going though price cycles or smaller companies about to generate cash flow (junior exploration companies, junior pharma, technology firms…).
The Price Comparables valuation is the result of valuing the company we are looking at on the basis of ratios from selected comparable companies: Price to Earnings, Price to Book, Price to Sales, Price to Cash Flow, Enterprise Value (EV) to EBITDA. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.
We have included the Other Comparables as a way to value companies that cannot be valued using Earnings based ratios. This technique is very useful for companies still experiencing negative cash flows such as mining exploration firms. We use Cash/Share, Book Value/Share, MarketCap, 1 Year Return, NetPPE as the ratios here. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.
Multiples are similar to Price comparables where we look at current or historic ratios for the company in question to assess what it should be worth today based on those historic ratios. We use the same 5 ratios as in the price comparables and value the company with its historic averages.
With Adjusted Book Value (ABV) we calculate the book value per share for the company based on its balance sheet and multiply that book value per share by its historical price to book ratio to calculate a value per share.
If we have Analyst coverage for the company we use the consensus target price here.

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