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Broadcom Inc. (AVGO) Outpaces Stock Market Gains: What You Should Know

Zacks Equity Research

In the latest trading session, Broadcom Inc. (AVGO) closed at $282.31, marking a +0.71% move from the previous day. This change outpaced the S&P 500's 0.19% gain on the day. At the same time, the Dow lost 0.11%, and the tech-heavy Nasdaq gained 0.81%.

Prior to today's trading, shares of the chipmaker had gained 1.65% over the past month. This has outpaced the Computer and Technology sector's gain of 0.15% and the S&P 500's gain of 0.56% in that time.

Investors will be hoping for strength from AVGO as it approaches its next earnings release. The company is expected to report EPS of $5.37, down 8.21% from the prior-year quarter. Meanwhile, the Zacks Consensus Estimate for revenue is projecting net sales of $5.76 billion, up 5.72% from the year-ago period.

Looking at the full year, our Zacks Consensus Estimates suggest analysts are expecting earnings of $21.28 per share and revenue of $22.55 billion. These totals would mark changes of +2.21% and +8.17%, respectively, from last year.

Investors might also notice recent changes to analyst estimates for AVGO. These revisions help to show the ever-changing nature of near-term business trends. With this in mind, we can consider positive estimate revisions a sign of optimism about the company's business outlook.

Our research shows that these estimate changes are directly correlated with near-term stock prices. To benefit from this, we have developed the Zacks Rank, a proprietary model which takes these estimate changes into account and provides an actionable rating system.

Ranging from #1 (Strong Buy) to #5 (Strong Sell), the Zacks Rank system has a proven, outside-audited track record of outperformance, with #1 stocks returning an average of +25% annually 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 13.17. For comparison, its industry has an average Forward P/E of 20.28, which means AVGO is trading at a discount to the group.

We can also see that AVGO currently has a PEG ratio of 1.11. 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 2.11 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 83, which puts it in the top 33% of all 250+ industries.

The Zacks Industry Rank gauges the strength of our individual 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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