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Broadcom Inc. (AVGO) Gains But Lags Market: What You Should Know

Zacks Equity Research
Veritex Holdings (VBTX) doesn't possess the right combination of the two key ingredients for a likely earnings beat in its upcoming report. Get prepared with the key expectations.

Broadcom Inc. (AVGO) closed the most recent trading day at $315.64, moving +0.2% from the previous trading session. This change lagged the S&P 500's 0.88% gain on the day. Meanwhile, the Dow gained 0.55%, and the Nasdaq, a tech-heavy index, added 1.32%.

Coming into today, shares of the chipmaker had gained 7.82% in the past month. In that same time, the Computer and Technology sector gained 5%, while the S&P 500 gained 3.96%.

Investors will be hoping for strength from AVGO as it approaches its next earnings release. On that day, AVGO is projected to report earnings of $5.17 per share, which would represent year-over-year growth of 5.94%. Meanwhile, our latest consensus estimate is calling for revenue of $5.66 billion, up 12.95% from the prior-year quarter.

Looking at the full year, our Zacks Consensus Estimates suggest analysts are expecting earnings of $23.13 per share and revenue of $24.42 billion. These totals would mark changes of +11.1% and +17.14%, respectively, from last year.

Investors might also notice recent changes to analyst estimates for AVGO. Recent revisions tend to reflect the latest near-term business trends. As such, positive estimate revisions reflect analyst optimism about the company's business and profitability.

Based on our research, we believe these estimate revisions are directly related to near-team stock moves. Investors can capitalize on this by using the Zacks Rank. This model considers these estimate changes and provides a simple, actionable rating system.

The Zacks Rank system, which ranges from #1 (Strong Buy) to #5 (Strong Sell), has an impressive outside-audited track record of outperformance, with #1 stocks generating an average annual return of +25% since 1988. Within the past 30 days, our consensus EPS projection remained stagnant. AVGO is currently sporting a Zacks Rank of #3 (Hold).

Looking at its valuation, AVGO is holding a Forward P/E ratio of 13.62. This valuation marks a discount compared to its industry's average Forward P/E of 19.53.

Investors should also note that AVGO has a PEG ratio of 1.12 right now. The PEG ratio is similar to the widely-used P/E ratio, but this metric also takes the company's expected earnings growth rate into account. The Electronics - Semiconductors was holding an average PEG ratio of 1.59 at yesterday's closing price.

The Electronics - Semiconductors industry is part of the Computer and Technology sector. This industry currently has a Zacks Industry Rank of 168, which puts it in the bottom 35% of all 250+ industries.

The Zacks Industry Rank gauges the strength of our industry groups by measuring the average Zacks Rank of the individual stocks within the groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

You can find more information on all of these metrics, and much more, on Zacks.com.

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